Driven to a standstill
The absence of new cars on our roads is a clear sign of a trade
experiencing a dramatic fall, writes Sean McCarthaigh
are as
rare as the proverbial
SIGHTINGS hen's teeth or
indeed moderately-
paid bankers.
The absence of 09-registration plates
from Irish roads is the most potent
sign of the crisis that has struck the
motor industry over the past year.
And there are few indicators that
the situation is going to get better any
time soon.
The low visibility of 2009 models
has become a favourite water-cooler
topic as many people regard their
failure to have spotted such a vehicle
since January 1 as one of the most
reliable barometers of the gravity of
Ireland's overall economic situation.
The scale of the downturn in a
once thriving industry is perhaps what
is causing most concern.
Traditionally January is the busiest
month for the trade as buyers queue
up to get their hands on a new model
proudly boasting the reg plate number
of the new year. Typically the change
adds a few thousand euro to the
potential resale value than if the same
vehicle was bought in December.
Although many dealers remained
cautiously optimistic over the quiet
Christmas period that 2009 would
provide a much-needed boost to an
industry that has gone swiftly into
reverse gear since last summer, Irish
forecourts have stayed silent ever since.
"There's simply no one buying at
the moment. Anyone who had
thought of buying a new car has
either put off the decision or decided
to trade in their existing car for a used
model. People just don't want to
commit so much money at a time
when they don't know if their job is
secure," said one dealer on Dublin's
southside.
"I even believe that there are some
potential buyers out there with money
who are afraid to be seen to buy a
new vehicle as they're worried they
might be considered too flash."
Whether neighbours are now trying
to keep down with the Joneses' or
not, the facts don't lie — sales of new
cars in January 2009 fell to less than
16,000 vehicles, a decrease of 66% on
the corresponding month in 2008.
While some reduction was predicted
as the 47,600 new cars sold in January
last year represented the single largest
monthly figure ever, nobody foresaw
just how dramatic the fall would be.
The Society of the Irish Motor In-
dustry had predicted that total new car
sales in the Republic could fall from
the 152,000 sold last year to below
100,000 but may now have to revise
this figure down even further. The last
time the industry posted such weak
results was in 1995 when just 87,000
vehicles were sold — a far cry from
the 100,000-plus vehicles that were
registered in the Dublin area alone at
the height of the Celtic Tiger.
SIMI director general, Alan Nolan,
claims the need for Government ac-
tion is reaching new levels of urgency
in a sector that has already shed in
excess of 3,000 jobs over the past six
months, with another 3,000 redun-
dancies predicted in the near future.
"It's very clear that if we continue
with the current outlook, thousands
of jobs will be gone as hundreds of
dealerships could be under threat,"
says Nolan. "Every single day is an
opportunity lost to have made things
better. The key problem for us is that
our trade is seasonal. We are fast
running out of time as April is really
the last month for good car sales
figures. Time is now critical."
Although not stated openly, many
car dealers feel the industry is owed a
favour by the Government as they be-
lieve changes to Vehicle Registration
Tax and motor tax last July, coupled
with the announcement of an early
budget in October, placed an even
further brake on sales.
SIMI has now called for a range of
Government measures to avert a major
crisis in a sector that provides 50,000
jobs and contributed €2 billion to the
State in VRT and VAT in 2007.
Exchequer contributions from the
trade could fall as low as €500 in
m
2009, the SIMI has warned. Already
the signs are ominous as VRT receipts
fell by 85% from €2 13
in January
m
2008 to just €32m last month.
cites two key de-
NOLAN new vitalmands as — introduc-
ing a scrappage
scheme and removing the anomaly
whereby the trade is the only industry
required to pay VAT on products sold
at a loss.
"Dealers can normally take the hit
where they might suffer a loss on a
vehicle or two. But in the current
climate where all car prices are falling,
they are really getting hurt by this
VAT requirement," says Nolan, who
claimed it was also affecting the stock
of used cars on the market.
While some might feel that an
industry which grew exponentially in
recent years should have a few shock
absorbers to cushion the effects of the
downturn, Nolan takes care to point
out that the transformation in the
"Of
marketplace is unprecedented.
course if you have had six or seven
good summers, you should be able to
weather one bad winter. But no
business, however well balanced, can
take a reduction in the order of two-
thirds of new car sales in their stride."
SIMI also pointed out that many of
its members had to invest heavily in
showrooms due to changes in block
exemption rules, introduced in 2002,
to retain their dealerships, while many
staff have already taken pay-cuts,
shorter working weeks or operating
on a commission-only basis.
The gravity of the situation has
been augmented by the fact that it is
taking place against the backdrop of a
global recession within the industry.
Two leading US car manufacturers,
Chrysler and General Motors, last
week requested additional funding of
€17.5bn from the US government on
top of almost €l4bn loans they
received late last year. Just last week,
Swedish car maker Saab, part of GM,
filed for bankruptcy, while Nissan and
BMW announced major job cuts at
their British plants earlier this month.
Across Europe, sales of new cars
have plunged 27% since January. The
European Automobile Manufacturers'
Association (ACEA) reported that just
958,500 new vehicles were registered
last month, the lowest January total
for two decades. Only Iceland record-
ed a bigger fall-off in new cars sales
than Ireland as the troubled Nordic
economy saw vehicle registrations fall
by an unprecedented 88%.
According to ACEA, all countries
in western Europe with the exception
of France posted a double-digit fall in
new car sales since the start of the year
with many, including Britain, Spain
and Italy, declining in excess of 30%.
"New car registrations across Eu-
rope have now fallen for nine consec-
utive months," said its spokesperson.
In contrast, sales of used cars are
holding up fairly well. Ken Grandon,
sales director of Grandon's of
Glanmire, Co Cork, which holds a
franchise for Fiat, Alfa Romeo and
Peugeot, claims the focus of his
business activity has switched from
new car sales to used models.
"We can't complain because we are
having a great footfall of customers
who are buying up affordable used
cars, while our service and parts
division are also very busy. But it
won't keep the lights on in the long
term. This should be a harvest time
for new car sales but it's simply not
the case this year. I certainly wouldn't
like to be trying to sell Mercedes at
BMWs at the present time," he said.
Merlin O'Reilly, chief executive of
taneous auctions at its Naas facility
every Wednesday and Saturday. Merlin
has also invested in technology that
allows customers to bid live online.
However, the effects of recession on
the industry have even surprised
trade veterans like O'Reilly. "People
are trading down rather than trading
up," he says, citing how a 2008 Peu-
geot 307 model with 16,000 km on its
clock sold for just €9,500, while a
02-reg Volkswagen Polo with
100,000 km went for €2,900.
In the midst of such gloominess,
SIMI sees a few chinks of light in the
distance. "It's easy to forget that many
people still have money," says Nolan.
"Interest rates are at historically low
levels and finance is available, while
fuel prices are also relatively cheaper
than they have been for many years."
While the industry hopes the
current crisis is merely a bump in the
road, the truth is nobody can be
certain that Ireland's car industry will
soon be back on track.
An 09-reg plate may well become a
collector's item in the future for all
the wrong reasons.

There's simply no one buying at the moment.

Anyone who had thought of buying a new car
has either put off the decision or decided to
trade in their existing car for a used model.
Merlin Motor Group, which runs the
country's biggest car auction from its
showrooms in Naas, Co Kildare, says
the nature of the business has changed
in recent months. "Half of all our
sales are now to members of the
public where previously they would
only have constituted around 8% of
the total. In tight times, people are
looking for bargains," he explains.
However, O'Reilly claims more
dealers than ever are visiting the auc-
tion, a sign that many are diversifying
their business away from new car sales.
O'Reilly attributes their strong
growth to the general state of the
economy and also a huge increase in
repossessed cars from financial institu-
tions being puts up for auction. Such
repos now constitute around 50% of
all vehicles put under the hammer.
Trade is so good that the company,
which lists around 600 cars on average
each week, is now running two simul-