Cantillon: New plan to restart motor trade

Irish policymakers may seem to be fundamentally committed to austerity as the route to our economic recovery, but it hasn’t stopped some business sectors being given the green light to take the stimulus route.

The motor trade is preparing to pitch its latest request to the Government: a swappage scheme, whereby the Government would offer a tax reduction of €2,000 on the VRT due on a new car if it is bought as part of a trade-in on a used car five years or older.

The plan is generally built around the model used in the scrappage scheme that ran in 2010 and was extended in a modified form for a further six months until July 1st 2011. The motor trade says the past scheme was responsible for 29,000 sales to owners who scrapped cars aged 10 years or older.

While the Government had to forgo €1,500 in VRT on those sales the trade argues that with an average tax take of €8,000 on each new car sold, it still meant the tax coffers were increased by €6,500 on each car, the vast majority of which would never have been bought during that time.

The same argument is no doubt being prepared this time. It will be stood up alongside warnings about an ageing car fleet – with the consequent road safety issues that this implies – and the environmental improvements when you offer the deal on low emission vehicles.

The trade will also underline the precarious state of the motor sector. The tax take from the motor trade has fallen from roughly €1.5 billion in the boom to €400 million.

Some within the motor trade fear that officials have become used to a market of 70,000 and budget accordingly.

The problem for dealers and distributors is that throughout the recession the sector has been granted several supports already. The earlier scrappage scheme may have ended in July 2011 but this summer sees the fruits of another successful request by the trade to have the numberplate system changed.

In 10 days’ time the 131 plate changes to 132, then to 141 for the first six months of next year before changing again to 142. And so on for years to come.

Dealers complained that with over half of all sales in the first three months, it badly skewed their business model. The Government duly obliged, against initial resistance from the likes of the Garda. It seems that even in the midst of the economic crisis and the clamour from most sectors of society for assistance or succour, the motor trade has had the Government’s ear.