Global car manufacturers are less interested in supplying Ireland now because lower taxation and stronger sterling means that the UK, Europe’s only other right-hand car market, is more attractive, motor dealers have warned.
“The UK is simply a better market for manufacturers,” Brian Cooke, director general of the Society of the Irish Motor Industry (SIMI), said. “Our VAT rate is about 3 per cent higher than the UK which means about €1,000 more per car, and they have no vehicle registration tax which adds about €5,500 to a car in Ireland.”
The “perfect storm”, created by the international shortage of semiconductor chips coupled with the war in Ukraine (where many vehicle parts are manufactured) and continued Covid-19 lockdowns in China, meant new car sales were already very weak across Europe, said Mr Cooke. Add Brexit to this, he said, and the Irish market was particularly bad right now.
The “massive shortage” of cars in the Irish market since the pandemic hit also meant high prices for used cars won’t be going down any time soon, said Denis Murphy, managing director of Blackwater Motors in Co Cork.
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“We benefit from the EU’s single market on every single product except cars because we operate in a closed market. We have the second-highest taxation in the EU after Denmark because of vehicle registration tax and we can’t get imports any more from the UK because of Brexit. The only way we can get used cars is through new car registrations but the UK is effectively blocked off.
“Prices have stabilised. Inflation is going back, but there’s no sign of car prices going down any time soon,” he said.
Another dealer, who chose to speak anonymously, underlined that manufacturers were allocating a limited amount of production to the various markets and favour those that offer them the best return.
It makes more sense to supply new right-hand drive cars to the UK market first, while Ireland gets only a token amount to keep the Irish market alive until such time as production starts to catch up with demand, he said.
He added that Ireland’s motor challenges were unique and exacerbated by VRT. “We are not an attractive market for manufacturers struggling with production and, until such time as they can build reserves of unsold vehicles, it might stay that way,” said the dealer.
The DoneDeal price index for the second quarter of 2022 last week showed that second-hand car prices were nearly 64 per cent higher than before the Covid-19 outbreak.
The rising demand for more affordable cars, and the lack of supply of used cars, means prices for second-hand cars at the lower end of the market have doubled since before the pandemic, rising by 96.9 per cent.
Inflation on cars worth more than €19,000 has fallen from 4.5 per cent to 1.5 per cent, but prices for the most expensive combustion engine cars, electric vehicles (EVs) and hybrids are experiencing “unwavering price growth”, says the report.
Most drivers could not afford EVs or hybrids and must rely on used petrol cars from the lower end of the market, said environmental economist Dr Tom Gillespie, who authored the DoneDeal price index.
“If people need to change cars, most cannot afford the expensive car that’s in any way clean right now,” said Dr Gillespie. “They’ll go for the older, cheaper car which is generally higher in carbon dioxide emissions.”
While the drop in supply and increase in demand for vehicles during the pandemic is an international problem, increased VAT on UK imports post-Brexit saw such trades halve between 2019 and 2020: “This is not just about the price,” said Dr Gillespie. “It’s mainly the supply and demand problem.”
There is concern within the motor trade that prices have peaked, and could fall back once global car manufacturing overcomes the shortage of semiconductors and other issues that have plagued the industry over the past two years.
For the 20 years before 2020, 225,000 new and second-hand cars were sold on average each year in the Republic, but the numbers available for the past two years have fallen to just 160,000.
“So over two years we’re about 120,000 cars short, that’s a massive shortage. And even though the Government says we have good public transport in this country, 95 per cent of private journeys are done by car here, so there’s a huge demand.
“People here can’t afford to buy new cars in the same quantities they’re bought in other European countries and we have a huge dependency on cars created by decades of government strategies that can’t be fixed any time soon.”
