Irish motor business mixes hope and confidence

5 November 2001: Already in a downturn before 11 September, then suffering inevitable shivers after that catastrophe, Ireland’s car sales business is nevertheless likely to emerge at the end of the year in a fairly sound state compared to half a decade ago when it was only beginning to come out of endemic doldrums.

Most leaders in the business here are also fairly confident of a good performance next year, though it is likely be down on the 2001 eventual finish.

"An out-turn of 165,000 would still be the third-biggest year ever in the industry," says Eddie Murphy, chairman and managing director of Henry Ford and Son. "The business has had problems in recent times, but this would still be an excellent result, and a barometer of the fundamental strengths of the economy."

He says there was a perceptible ‘immediate slump’ in consumer confidence in the aftermath of the WTC attacks, but notes that the sales out-turn for October is just 20% down year-on-year compared to 29% down at the end of September. "This proves that if there are good deals out there, there are buyers for cars, and all the marques will be going all out to keep people coming into their dealers’ showrooms."

An end-of-year 162,000 is the sales tally forecast by James Wyse, managing director of Citroen franchisees Gallic Distributors. That’s some 30% off on 2001 - itself an exceptional year. But he’s suggesting that the Government could come up with some confidence-boosting measures to keep the car business on the fizz, since it is such an important element in the overall revenue gathering of the state.

"They did it before, twice, and the initiatives worked," he says, recalling the success of the 1994 reduction in VRT and the 1995 introduction of the scrappage scheme.

Nissan Ireland’s Paul O’Sullivan is cautious but confident of a good end-year market, hedging between 160,000-165,000 units. There was a sharp fall-off in showroom traffic after 11 September, as people worried what was going to happen next,"but that has largely dissipated."

O’Sullivan’s dealers have reported softened demand for new cars in recent months, though there is strong interest in returned rental cars. "They represent good value, and this interest probably reflects the high cost of change which has been hitting buyers in recent years."

That’s a cost which affects mass-manufacturer customers more than luxury brands, and the boss of the Audi division in Motor Distributors Ltd, Ireland largest car distributor, is one of very few celebrating continuing sales growth.

"Our market share has increased year-on-year by almost half, to 1.45%, and our actual unit sales are up by 4%," says John Hayes. "Luxury car buyers didn’t pull back on orders after 11 September ... and for both September and October we had a market share of 2.8% and were first in the luxury brand league. We’re also bullish about the coming year."

Hayes and MDL have put a 2002 forecast of 160,000 units into the melting pot at the VW Group’s German marketing department, though the situation ‘will be revisited’ at the end of January. Closest to that among the other car business leaders is Nissan’s Paul O’Sullivan, who says that this year’s sales ‘will be hard to match’ but 2002 might just go to 150,000.

Ford’s Murphy is personally forecasting ‘a little more’ than the 140,000 units currently being suggested by the Society of the Irish Motor Industry. This is significantly lower than the 155,000 the SIMI was projecting prior to 11 September.

Citroen’s Wyse is right on the spot with SIMI’s forecast, though he believes some people are being ‘too pessimistic’ about the prospects for both the Irish economy and car sales next year. He says the current recession is ‘different’ from the one which followed the Gulf War in 1991/92. "That was led by a crisis in oil supply, this one is from a consumer lack of confidence."

Wyse makes a point common among his peers that the sales of commercial vehicles might be a better indicator of the underlying strength of the economy than car sales. "The Van market will be 39,000 units in 2001, down 2,500 units or 5% on 2000," he says, suggesting also that the van market will drop to 36,000 units in 2002, representing 3,000 units or 8% down on 2001.

It is a sentiment echoed by Paolo Gagliardi of Fiat Auto Ireland, who says van sales are ‘a great indicator as to how the owners of small and medium sized business feel about the future’. Fiat has increased its share of the Irish LCV market from 4.9% to 7.6% in a year.

Meantime, the SIMI trying to persuade the Department of Finance to reduce VRT and eventually phase out a tax that puts the Irish market out of kilter with the rest of Europe. The organisation is also looking for a ‘clawback’ on the VRT element in exported secondhand cars, which would make them economically viable to sell abroad, and allow dealers to sell new cars without worrying about having too much trade-in stock.

"That would be only fair for an industry which has paid high VRT on importing secondhand cars for years," says Audi’s Hayes. "And the figures show that it would be a ‘win-win’ situation for the Government, because increased sales of new cars would more than compensate for what is currently a notional loss for them, because we can’t set up a viable export business anyway." BB