Uncertainty puts brakes on new car sales

The fall in new car registrations – down 4.5 per cent in the first half of the year – is clearly a cause for concern in the motor trade. It certainly seems at odds with the growth in economic activity in other consumer-driven sectors.

Part of this is undoubtedly linked to the rise in used imports, up over 12 per cent so far this year. Some 51,879 used cars were registered for the first time in the State in the six months to the end of June and some buyers may be opting for a used import over a brand new car.

However, the vast majority of these imports – 83 per cent – are more than two years old, while the largest cohort were first registered as new cars in 2014.

It is therefore mainly used car buyers who are driving demand for UK imports. As a consequence of the recession, the stock of three to five year old Irish registered cars simply cannot meet demand.

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The rise in imports does have a secondary knock-on effect on new car sales, however. Their arrival in the Republic is pushing down used prices and as a result lowering trade-in values. This in turn makes the cost of change greater for those wishing to buy new.

Uncertainty

Other potential reasons for the fall in new sales may be uncertainty over the future direction of the motor industry as a whole. The debate over the future of diesel, for example, is certainly making some buyers feel uneasy about making a major investment in a new diesel-powered car at the moment.

Similarly, the low pick up in electric cars – just 529 registrations in a new car market of 87,151 – despite all the publicity and incentives on offer, suggests buyers are wary of being overtaken by the pace of technological developments.

A car is the second biggest purchase for many households after their home, and their biggest depreciating asset. It’s understandable they are cautious, particularly when speculation mounts about changes to the motor tax regime and with several European cities rolling out diesel bans.

If you are spending €30,000 or more on a new car, you want some degree of certainty about the road ahead.

Downturn

The downturn in new registrations should worry the Government as well. The exchequer collected €754.7 million in tax receipts from car sales in the first quarter of 2018. During this period the average tax take from a new car was €9,323, compared to €3,255 for a used car, according to the Society of the Irish Motor Industry.

It is in everyone’s interest, therefore, if the Government can offer a clear road map for any upcoming changes to the motor tax regime, particularly when it comes to diesel. Authorities should be looking to calm uncertainty in the car market at present, not add to it.