Car sales in May were down nearly 20 per cent on the same month last year. It's the largest month-on-month fall so far this year and signals a fall-off in both retail and fleet sales.
New car registrations for the month were 14,882 compared with 18,457 in May 2002, according to the Society of the Irish Motor Industry (SIMI). For the year to date, 100,753 new cars were registered to the end of May, down 6.7 per cent from 107,973 for the same period last year.
According to Eddie Murphy of Ford Ireland, the figures reflect the general economic downturn. "It confirms what dealers have been saying about showroom traffic being quiet."
Ford, continues to top the sales league table this year, with 12.4 per cent of the market to date, followed by Toyota 10.8 per cent. Both are keen to become this year's best seller, as Ford celebrates its 100th anniversary while Toyota Ireland mark 30 years as Irish distributor. Toyota did top this months sales table with 2,134 sales, thanks to the new Avensis, compared to 2,090 for Ford.
Meanwhile, Irish distributors remain convinced that prices will rise by about 10 per cent in the next 18 months as a result of block exemption.
Peugeot in Ireland, for instance, has already had its wholesale price increased by five per cent from the manufacturer. Other marques are expected to face similar increases, the only difference being how the increases are phased in.
Along with the normal model change price increases of around 1.5 per cent, this suggests that, by the end of 2005, real prices of cars here will have increased by a fifth.
Under the rules for block exemption, dealers will be allowed to open anywhere in the EU if they meet manufacturers' criteria. With pre-tax prices varying across the EU, manufacturers are likely to opt for a central pre-tax price for cars to prevent dealers simply opening in a low pre-tax price area and exporting to their other dealerships in areas where pre-tax prices are higher.
When the block exemption rules were introduced, Irish distributors and the SIMI warned that manufacturers would raise prices here, which are between 80 and 90 per cent of the price in Britain and similarly lower than German prices, according to the EU Commission.
Over 3.5 million cars are sold in Germany per year, over two million each in Britain, France and Italy. In Ireland 156,000 cars were sold last year. This suggests that price cuts are unlikely in big markets to bring them into line with smaller ones.
According to several industry spokespersons, while Irish distributors will balk at attempts to harmonise pricing in one foul swoop, they do expect pre-tax price increases in the coming 18 months or so.
The problem will be most acute in the highly competitive small car market, where price plays a much greater role in purchasing decisions.
While distributors open every comment on block exemption with a call for the Minister for Finance to reduce taxation on new car sales, most accept this will come to nought and whatever pressure the industry can bring to bear on the minister will come into play only in more favourable economic circumstances.
So, while many have yet to formalise a strategy for price adjustments, one method to mask the increases in new car launches and entering more imaginative niches in the market.
Meanwhile, as the US motor industry braces itself for signs this week that months of generally robust vehicle sales are coming to an end, there are also harbingers of doom in the financial markets. One of Wall Street's leading car analysts has warned that Ford or GM could be bankrupted within a decade, or Chrysler abandoned by its German parent if pressures on the big three US carmakers continue.
Saul Rubin, analyst at UBS Warburg, said increasing competition and continued weakness in the US market would push down weak profitability and make it difficult for carmakers to meet pension and healthcare liabilities. It was "not out of the question" that one of the three would file for bankruptcy protection, he said in a note to investors.
"Likely, industry trends will result in a major casualty at some point in the longer distance."
It's the worst assessment so far from Wall Street analysts, who tend to be optimists.Rubin said the companies were in no immediate danger given their cash piles and long-dated debt, and problems would not become acute for 5-10 years. However, he said they would be unable to pay interest and make the investments needed to remain competitive if their unfunded pension and healthcare obligations were treated as debt.
There appears to be little prospect of the companies renegotiating pension and healthcare burdens with unions, even though the crisis is worsening as interest rates drop, inflating the current value of future liabilities.
Back home, there is some good news for motorists, however. A rise in new car prices here will push used car prices upwards. Good news for those with used cars to sell. Every cloud has a silver lining
- Additional reporting: Financial Times