Irish motor industry faces job losses and potential dealer closures

The Irish motor industry faces job losses and potential dealer closures well into next year, warns a new report from Deloitte Ireland.

Its review of the Irish car market examines the challenges facing the Irish motor industry in the wake of Covid-19 and the likely impact of the crisis on the future of car sales and aftersales services over the next 24 months. Deloitte warns there will be casualties in the motor trade and predicts consolidation of dealerships across the State.

The Irish new car market is down 32 per cent so far this year, with sales in the crucial new 202 registration period down 18 per cent over the first two weeks of July compared to the same period last year.

Andrew Byrne, director of financial advisory at Deloitte, said: "Our review of the market reveals that some redundancies in the sector will be unavoidable and expected in Q4 [October to December] of 2020 and into 2021.

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“Any dealer who was struggling pre-pandemic may trade through 2020, possibly utilising the Revenue debt warehouse scheme, but with 2021 expected to be as challenging as this year, there will be casualties arising.

“As it is perceived there are too many independent dealers to service the current levels of demand, there will likely be some consolidation of dealerships in the medium term.”

Mr Byrne points to the fall in new car sales globally and says Ireland is no exception. “There will be significant reduction in new car sales this year – for the fourth consecutive year – coupled with a possible slowdown in the second-hand market over the coming 12 months.

“Considering the level of overall economic uncertainty over and above this, it is difficult to see that t there won’t be casualties in this sector emerging in late 2020 or 2021. This will likely result in an overall reduction in the numbers of branded and independent motor dealers.”

According to Byrne: “Acting early in times of crisis – which may involve some form of restructure – may lead to a leaner, more efficient organisation with increased chances of survival.”

The latest Deloitte consumer tracker found that in the first week of July 22 per cent of Irish consumers reported being concerned about making upcoming payments and 37 per cent were delaying making large purchases. In terms of the motor market, 52 per cent indicated they were planning to keep their current vehicle longer than originally expected.

There are some positives for the motor trade. Pent-up demand, coupled with the additional savings many families have garnered while working from home and a likely reduction in consumers travelling abroad, may lead to many customers seeking better equipped, second-hand vehicles rather than opting for new vehicles, according to the report.

However, Daniel Murray, partner and head of consumer industry at Deloitte cautioned that it remains to be seen whether the public will be ready to continue to make these significant purchases – usually second in size only to a house purchase – in the current environment. "Many factors are presently at play which affect these larger purchase decisions: job security; economic indicators; falling GDP; ability to secure finance; conflicting messages about electric vehicles, to name a few."