NEWS ANALYSIS CONSEQUENCES OF LOW CAR SALES:Car companies are holding off Irish launches in light of poor sales at the start of the year, says PADDY COMYN
POOR EARLY sales in 2009 have prompted some leading manufacturers to revise their plans for product launches in the State.
Traditionally in Ireland, the first three months of the year are the busiest time for new car sales. In 2008, 61 per cent of the total new car sales for the year were completed by March 31st.
So far in 2009, sales have dropped by a staggering 65 per cent and the rest of the year is unlikely to pick up drastically, even if the Government does introduce a scrappage scheme (several months after such a measure has been introduced with some success to markets such as Germany and France).
Launching a new car has traditionally been a tricky exercise outside of the first three months of any given year, as our registration system tends to encourage buyers to wait until the following January to invest.
But with such poor sales in 2009 and with a collective tightening of belts from local distributors, some have decided to postpone cars which were due to arrive in Ireland in the coming months.
Toyota Ireland has delayed the launch of two of its new lower-volume products, originally planned for launch in mid-2009 and set to be launched in other European markets as planned.
The new version of the Prius is one. The new model has lower emissions and is more technologically advanced than the model it replaces and comes with a more powerful 1.8-litre petrol engine working alongside an 80hp electric motor. The new car was due to go on sale in the summer, but its Irish launch will now be delayed until 2010.
The same is true of the Toyota Verso, which replaced the Corolla Verso. It goes on sale across Europe and in the UK next month, but its Irish date has been delayed. A spokesperson for Toyota Ireland told The Irish Times that “the launch of the Prius and the Verso are now scheduled for early 2010 instead of this year given the running speed of the market”.
It is a similar situation at Nissan: the Pixo, a sister car to the Suzuki Alto that was reviewed in last week’s Motors and which goes on sale in Ireland next month, has been delayed until 2010, as has the launch of the 370z sportscar. A spokeswoman for Nissan Ireland said: “The 370z is under global review at the moment, so unfortunately the car won’t be on sale here this year.”
The re-launch of the Lancia brand to Ireland, which was due this summer, has also been put back, but Fiat Ireland managing director Adrian Walsh said this was not for economic reasons.
“The Delta is out in Europe in left-hand drive and the Ypsilon is due for a change and that is planned for the first quarter of 2010. The plan is that we will introduce a right-hand drive Delta closer to the time.”
Last week the UK’s Society of Motor Manufacturers and Traders reported that production in the UK had dropped by 59 per cent in February compared with the same month last year. It was reported that there were 105,000 cars, worth £1 billion, stockpiled at the Royal Portbury docks near Bristol. Such alarming stockpiles, both in Europe and the US, has led to many facilities halting production or drastically reducing their output. In the United States, the Wall Street Journal this week reported that Toyota has enough Yaris models to last 175 days, Chrysler has 205 days’ supply of the Dodge Caliber and Chevrolet has 427 days’ worth of the Aveo model. That means that they could cease production now and they wouldn’t run out until 24th May 2010.
In the US, the predicted mass exodus away from SUVs and large saloons to small cars and hybrids, hasn’t happened to any great degree. Sales of the Toyota Prius in the US were off 30.8 per cent in February when compared to 2007 figures and The Detroit News is reporting that hybrid sales were down 10 per cent at a time when the car makers are preparing to flood the marketplace with even more of them. Low fuel prices are blamed for the slump in hybrid sales in the US.
With spend on research and development so often linked to the sales performance of a particular brand, it appears likely that there will be a slowdown in development of new models and new technology. And this couldn’t come at a worse time, as a draft European law, nearing final approval, would limit emissions from all new cars sold in the EU beginning in 2012 and fine companies that go over their caps.
Toyota, expecting its first loss in almost 60 years, said at the end of 2008 that it would be trimming its RD spending without going into specific amounts. Honda said in January that it would spend 595 billion yen on research in this fiscal year, five million less than its initial plan. Daimler AG told Bloomberg that it will maintain spending on new models and technology at €4.4 billion, as it did in 2008, €1 billion more than it did in 2007.
BMW, Fiat and other car makers received €3 billion in European Investment Bank loans earlier this month and these have been earmarked for research into cleaner engines and more efficient cars. This funding is provided under the EIB’s European Clean Transport Facility (ECTF). Companies benefiting from the loans include BMW, Daimler, Fiat, PSA Peugeot-Citroen, Renault and Volvo. A total of €7 billion will become available in the first half of this year and similar levels of financing will be available until 2012.
While these loans will contribute to meeting environmental requirements, Europe’s manufacturer’s association says it won’t be enough to confront the economic circumstances and is calling on policy makers to intervene. “The arrangement with the EIB underlines the importance of the automobile industry for investments, RD and employment in Europe as a whole,” said European Automobile Manufacturer’s Association secretary general Ivan Hodac.
“The automotive industry is essential to the EU economy. It is the engine of the manufacturing industries, one of the biggest employers in Europe, the largest investor in innovation and RD, and a formidable export force,” said Hodac.
“Overcapacity has and will continue to be addressed by the automobile manufacturers as part of a long-term strategy to strengthen their global competitiveness and ensure a high-skilled workforce. The cause of the current crisis is the unprecedented credit crunch and the rapid deterioration of all key automotive markets. The European automobile industry is taking its responsibilities; now European policy makers must follow.”
Speaking to The Irish Times, Sigrid de Vries, a spokeswoman for the association, said: “Our members spend €20 billion per year in RD and if you speak to them individually it is probably more than that. Manufacturers now are planning cars for five to seven years’ time and that, we hope, will be after the crisis. These loans, while welcome, won’t stretch very far.”
Six European countries have applied to the EU to be allowed to provide aid packages for their manufacturers. And this isn’t just to prop up jobs in many cases. It is to ensure that there will be a low-emissions, safe replacement to the car you are driving now. Ones that must meet ever-tighter restrictions set by European policymakers.