THE MOTOR trade has long been a barometer for the Irish economy with a drop in car sales being the harbinger of troubles ahead, and it has been no different in the current recession. According to the Central Statistics Office, sales of new private cars reached their post-millennial peak in 2007 when 180,754 vehicles were registered. This was followed by a fall to 146,470 in 2008 and a near collapse to 54,432 in 2009.
But the alarm bells had started ringing in the second quarter of 2008 when the fall in sales started to accelerate. In the early months of the year the fall was between 10 per cent and 20 per cent but this jumped to more than 50 per cent in May and remained above 40 per cent or higher for the remainder of the year.
“It’s been a tough couple of years for the industry,” says Bank of Ireland Finance managing director Pat Creed. Referring to the Society of the Irish Motor Industry figures for the year he says that “the 57,000 cars sold was a frightening number. At the beginning of 2010 the industry was hoping for an improvement to 60,000 or possibly up to 70,000 and we have already had more than 87,000 to the end of October. We could possibly get to 90,000 by the end of the year and this will have been a remarkable turnaround”.
He attributes this recovery to a number of factors. Among the most significant is the Government scrappage scheme which offers buyers a €1,500 discount on their new car when they trade in a used car that’s 10 years old or more against it and the new vehicle falls into the Band A or B and B CO2 emissions categories.
“The scrappage scheme has accounted for around 15,000 in sales and that has been a great boost to the industry,” says Creed. “But that still means that 75,000 cars will be sold outside of the scheme by the year end. That’s a 25 per cent increase on last year and that is a reflection of some of the demand that had built up last year. A lot of people and companies held back on replacing cars in 2009 and have gone ahead and done so this year and that has made a big difference.”
“The motor trade is one area that has seen a very strong recovery since the previous year,” says Bank of Ireland group chief economist Dan McLaughlin. “The scrappage scheme has obviously had a major impact. You’d have to say that if the Government is paying out just €1,500 for every new car sold under the scheme and 20 per cent of the price of the car is tax then the exchequer is clearly winning. It has been an unqualified success.”
The problem lies in what to do now. “The difficulty would arise if the Government doesn’t roll it over for another year. That would have an impact on sales,” McLaughlin points out. “The exchequer is clearly gaining from the scheme and so is the industry. While we don’t have a car manufacturing industry in this country we do have an industry that sells and maintains cars and that provides employment. I would be surprised if the Government didn’t renew it.”
He agrees with Pat Creed that other factors also come into play. “Car prices are now down year on year. The dealerships are putting a lot of effort into selling you a car. It’s one of the few areas of the retail sector that’s had a good year.”
“In fairness to the manufacturers they came in behind the sector and supported it in terms of price and so on,” Creed agrees. “There is real value to be had if you are in the market for a new car at present.”
Bank of Ireland has also been playing its role in supporting the industry according to Creed. “We support the trade at a number of levels,” he explains.
“At corporate level we offer support with fleet purchases – we have a relationship with Avis Fleet Management in that respect. We help medium-sized businesses with fleet financing, and we support small business purchases through the Bank of Ireland Finance direct model.”
On the franchise side Bank of Ireland Finance has relationships with Toyota, Lexus, Volvo, Land Rover, Saab, Mercedes and Jaguar. This means the bank supports the various dealers with the working capital they need for stock and so on – the financial lifeblood of the industry. “We also have the franchise for the retail finance arm of Ford Credit,” adds Creed. “Ford looks after the working capital requirements of their dealers themselves.”
He believes 2011 will continue to present challenges. “We are all going to have to work very hard if we want to maintain sales at current levels. I very much hope that the Government renews the scrappage scheme. It’s going to be about affordability and the motor companies and the dealers are going to have to be imaginative and innovative in their offers. We will be there to support them in that. Equally, I would encourage any dealer experiencing difficulties to come in and talk to us as early as possible. We will do whatever we can to help our customers get through short term difficulties.”
