Sales of new cares have collapsed since the end of the scrappage scheme in June, new figures from the motor trade show.
According to the Society of the Irish Motor Industry (Simi), sales of new cars in November were 49 per cent down on the same month last year.
Simi director general Alan Nolan expressed concern that the fall off in car sales could be exacerbated next year if the proposed 2 per cent VAT increase is brought in at the start of 2012
“At the launch of our pre-budget submission in October, we predicted that 70,000 new cars would be sold next year. Following the announcement of the proposed 2 per cent VAT increase, we have concerns that this figure will reduce further if the VAT increase were to impact in the first quarter,” he said.
He said that with the increases in VAT, combined with increased road taxes and fuel duties which are set to be announced next week, the car sales industry was “facing another year where employment is again negatively impacted".
He urged the Government to delay the implementation of the VAT increase until after the first quarter of next year, when over half of all new cars for the year are likely to be sold.
“We understand that the Exchequer needs to recoup lost revenue but increasing the VAT, during the busiest retail period, is unlikely to achieve this; it is more likely to have the opposite impact,” he said.
He claimed that a deferral of the VAT increase until after the peak selling period would give the industry “some chance of stability next year”.
He said the “the extreme seasonal nature” of car sales meant that if business was bad in January, it would be “bad for the entire year and if the VAT increase is introduced in January, we will no doubt see a fall in sales for the whole year, which will have a serious impact on jobs”.
The scrappage scheme, which offered people trading in a vehicle aged 10 years or over a discount of up to €1,500 on a new low-emissions model, was introduced in the December 2009 budget.
Following a successful year in 2010, when new car sales increased by 56 per cent to some 89,000, the scheme was extended for a further by six months but with a reduced saving of €1,250 for individuals participating.