Sales may break 180,000 barrier

Sunday Business Post - Winter Motoring Supplement - December 10 2006

New car sales in Ireland are expected to total 180,000 by the year's end, according to Eddie Murphy, chairman of Ford Ireland.

“Car sales in Ireland are growing 7 on 10 % year on year," he said. "This year will end up at about 180,000 cars, and we expect close to 200,000 units for next year."

With late sales projections down on the projections forecast for the start of 2006, the mood in motoring circles is one of caution.

“The market slowed down quite a bit towards the end of this year, which was a bit contrary to what we all expected,” said Frank Kennedy, General Manager with Honda Ireland.

“Interest rate hikes and so forth, and the general economic conditions would have cast that frustration or annoyance on people. They have less disposable income and are keeping their money in their pockets and we see that going forward into next year as well."

According to statistics compiled by the Society of the Irish Motor Industry (SIMI) , new car sales in Ireland in 2004 were 154,136.

Last year the corresponding figure grew significantly by 11 per cent to 171.732. This year's growth rate is expected to finish up just half of that.

SSIA spending on new car registrations had been lower than expected. However, with the majority of accounts set to mature next May, the true impact of the SSIA scheme on the motor industry's coffers has yet to be felt.

"There wouldn’t be an awful lot of reliance from our side on the SSIAs delivering a great result next year,” said Kennedy. "You could argue that our market is gone at that stage as over 75% of registrations will have taken place."

Murphy said that sales of second hand British imports in the Irish market stood at about 70,000.

“From an industry point of view and from a consumer point of view that may have a damaging effect on new vehicle sales,” he said. “The more used cars that come into Ireland the great the potential for existing used cars to fall in value. Then the customer is faced with a bigger cost of change.”

SIMI has been very vocal in their condemnation of this practice, pointing to the unregulated ‘black economy’ of individuals selling used imports from makeshift premises and with no industry regulation.

“There are guys with cars on display on the side of the road and how they are getting away with it I don’t know," said Murphy. "If it was any other business the local council or some government department would be down on them.”

The recent drop in the price of car insurance has, in contrast, helped to boost sales in the Irish motor industry.

“There was a time four or five years ago when insurance costs were the bugbear of an awful lot of people, especially young people coming into the market,” said Murphy. "Certainly the premiums have fallen and personally I think there is scope for them to fall even more."

Green Motoring

The well publicised volatility in petrol prices, combined with government controls on CO2 emissions, means that customers are increasingly looking for ‘greener’ products.

“The environment would be definitely one of the biggest issues going forward in the motor industry over the next number of years," said Kennedy. "It will certainly have a large bearing on they type of cars that are being sold. People will be looking for cars which are more fuel efficient and certainly more environmentally friendly."

In 2005 Ford introduced the Focus FFV model, which runs on a mixture of unleaded petrol and bioethanol. There are now 13 Maxol filling stations nationwide which distribute the Maxol Bioethanol 85 fuel, a dairy byproduct manufactured by the Carbery Group in Cork. This fuel produces up to 70% less CO2 than conventional unleaded petrol.

“The fuel itself is about 15c a litre cheaper than unleaded,” said Murphy. "The CO2 emissions from the car and the whole process of how the fuel is sourced in the first place is far more beneficial to the environment."

Kennedy said that green-conscious consumers are also turning towards diesel models as a cleaner option.

“We are also growing our diesel sales with Honda’s ‘Whispering Diesel’ engine," he said. "This year diesel has allowed us to grow Accord sales and that is encouraging.

From a CO2 emission point of view they are more environmentally friendly than petrol engines at this moment in time."

Luxury Models

Another trend in the Irish new car sales market which looks set to continue in 2007 is the move towards more expensive luxury models.

“Like everything else in Ireland it is a more affluent market than it was,” said Murphy. “Four wheel drive and off road vehicles at the moment are about 12% of the industry and premium or upmarket models are another 12% so a quarter of the market can be classified as expensive four wheel drive or premium brand models. If you go back to the mid 90s that 25% was at most 5%.”

Kennedy said that younger customers, in particular, are especially drawn towards luxury or premium models, and that they are prepared to borrow to get the car that they want.

“The type of people with the disposable income tend to be the younger people," he said. "They say 'we want our car now, we are prepared to finance it, and we want the latest and greatest'. The higher the specification in the model the more it seems to be in demand."

However Murphy added that, in line with the growing environmental consciousness, consumer demand for larger models is shrinking.

“Personally, I think the days of the big four wheel drive vehicle are drizzling," he said. "They are too big to be perfectly honest. There is a bit of a society backlash which is beginning to gather momentum against them."