Uncertain road ahead for motorists and car dealers

Few sectors face as much upheaval as motoring. Joe Duffy Motors, one of the country's largest car dealers, this week reported a jump in revenues and profits for 2020. But uncertainty lies ahead for the industry.

Several things are happening at once in the market, convulsing its economics. First, there is climate change. Budget 2022 will see an increase in carbon taxes that will add close to €1.50 onto an average tank of diesel from Wednesday, and €1.25 for petrol. Similar increases are coming every year until 2029.

A once-in-a-generation shift is under way from liquid-fuelled cars to electric vehicles (EVs), and the ramifications of this have yet to fully play out in the market. Will EV prices come down quickly enough to keep cars affordable for the majority? Can national grids produce enough electricity?

Fuel

Fuel retailers are struggling to install the required infrastructure while traditional car brands are struggling to keep up with the pace of technological change set by EV pioneers such as Tesla. The only certainty is that government subsidies will be required to smooth the changeover, and motorists will pick up the tab for this in the end.

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The car sales market is also in flux due to the impact of the pandemic on supply chains. Most modern cars rely on computer chips to operate. Yet lockdowns across the world decimated chip production over the past 18 months, all while demand skyrocketed for chips from others sectors, such as consumer electronics.

Semiconductor companies

The shortage is causing long delays of up to a year for delivery to customers of some brands, biting on dealer sales. The mood music from listed UK car dealers and also from semiconductor companies is not good – the shortage may run on.

These issues have led to huge demand for secondhand cars, where prices and profit margins have soared, helping dealers such as Joe Duffy Motors ride out the pandemic. It said it expects an eventual “realignment”. But who knows when that will come. It’s going to be a bumpy ride for some time to come.