Report predicts fall in price of cars

Car buyers can expect lower retail prices in the next few years if manufacturers and governments allow reductions in production cost to be passed on to the consumer, according to a new report. The Deloitte and Touche study on the future of the Irish car market predicts price cuts as car assembly capacity worldwide increases from 178,000 vehicles per day at present to 210,000 by 2001. However, the authors warn that retail prices will go down only if governments do not levy green taxes on cars.

At present Government taxes account for a third of the retail cost of a new car in Ireland, while sales and distribution costs can account for another third.

The Automotive Industry: strategies and priorities in a global environment, prepared by Deloitte and Touche's Institute of Manufacturing Research, predicts a "re-engineering of the sales and distribution process" in the next few years. This would entail fewer car dealers, a greater tendency on the part of manufacturers to sell cars directly to the public and the emergence of new types of dealers, such as supermarket chains and financial institutions.

New cars will be delivered to their owners more quickly by "push[ing] the middle man out of the delivery channel".

The report says many manufacturers are frustrated by the current sales chain, whereby their entire output for each country is sold to one main dealer, who then sells the cars on to local dealers and garages. Deloitte and Touche predicts that manufacturers will move in the next few years to break this link in the chain connecting them to the customer.

In the United States the number of dealers has decreased by a third over the last 25 years, despite a significant increase in car sales.

The report's authors predict car manufacturers will use computers and software to help customers choose and customise the vehicle of their choice. This development will be facilitated by the emergence of car superstores and "car cities".

American superstores like Car Max and Driver's Mart offer prices 5 to 10 per cent lower than normal dealers, and customers can "buy" additional services such as on-the-spot financing and insurance. These superstores cut the number of sales people they employ by using computer kiosks and video presentations to acquaint customers with different car models.

The report says greater automation would enable sales people to become "sales consultants" and to concentrate on enhancing customer service, perhaps even visiting their customers to check that everything is all right with their new car.

The authors of the report believe there is also scope in Dublin for the development of a "car city", where car shoppers could visit a number of different car dealers and suppliers under one roof.

The study predicts that Internet-based sales will also grow as Europe moves towards a single market and taxes are increasingly harmonised.

"Changes in sales and distribution mean that customers will soon be designing their own car from standard accessories, ordering it through whatever channel suits their style and pocket and having it delivered, financed, insured and taxed by their favourite sales consultant."