Calls for scrappage scheme intensify

Sunday Business Post - Motoring section - Feb 22 2009

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Leading figures in the Irish motor industry are calling on the government to introduce a new scrappage scheme to address a dramatic drop-off in sales this year. In January, new car sales totalled just 16,000, down 66 per cent on the 47,000 sold in the same month last year, according to figures compiled by Society of the Irish Motor Industry (SIMI).

‘‘I would be very fearful if the sales in January are replicated for the rest of the year - with that, you get a full year figure of 63,000 units. That is down from 151,000 in 2008, and 186,000 in 2007,” said Eddie Murphy, managing director of Ford Ireland. ‘‘You do not need to be a rocket scientist to see that there will be a lot of job losses, and a huge drop in the government’s VRT and Vat receipts.”

Motor sales resulted in about €2 billion in VRT and Vat returns to the exchequer in 2007, which fell to €1.5 billion last year. Murphy said returns this year would be significantly lower. ‘‘The government has a huge hole in terms of the money they are going to get from the motor industry. Unless they do something very quickly, that hole is going to get bigger,” he said.

A scrappage scheme - where a VRT rebate was offered to new car buyers -would stimulate car sales at minimal cost to the exchequer, said Pearce Flannery, chief executive of Pragmatica, a management consultancy specialising in the automotive industry.

‘‘It is a win-win situation from a government point of view,” said Flannery. ‘‘It will not result in any net cost to the exchequer. At a time when they should be beating down the doors to secure any money generating opportunity, their silence on this one is deafening and frustrating.”

The initiative could, Murphy said, operate in a similar manner to an earlier scrappage scheme which ran from1995 to 1997.

‘‘The last scrappage scheme was aimed at vehicles that were ten years or older,” said Murphy. ‘‘There was a lot of logic in doing that, as there were cars driving around that were dangerous or clapped out. Fourteen years on, there are actually more cars [that are] around ten years old or older than there was then.”

The old scheme offered a rebate of IR»1,000 (€1,270) for each car traded in. Murphy said any new scheme introduced should offer at least the same amount to participating motorists.

‘‘The rebate should at least equate to 50 per cent of the Vat and VRT payable. We would argue that is just the minimum required,” he said.

Flannery called for a significantly higher rebate to encourage large-scale uptake.

‘‘A scrappage scheme of €8,000 to €10,000 would make it worth people’s while,” he said.

The VRT rebate could also be targeted at taking environmentally unsound vehicles off Irish roads, said Flannery.

‘‘They could take hugely-emitting vehicles off the road by giving a 50 per cent VRT rebate on the new car if it emitted 50 per cent or less than the old vehicle. That would change hugely polluting vehicles into highly fuel-efficient cars.”

Murphy said it was likely that distributors and dealers would offer their own incentives alongside a government run scrappage scheme, if it was introduced.

‘‘I am sure that all of the distributors would embrace it aggressively and run with the opportunity, whether in the form of a price discount, or some other form of incentive,” he said.

According to SIMI, 3,000 motor industry jobs have been lost since September, and another 3,000 are at risk.

Flannery said the situation facing the industry was potentially far worse.

‘‘There are 75,000 people employed in the Irishmotor industry, and it is now probable that 50 per cent of those will lose their job,” he said.

‘‘There will be massive closures of franchise dealers. January, February and March are supposed to be the lucrative sales months of the year, and what is coming down the line is dismal altogether.”