Full speed ahead? Car sales in Ireland

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Highlights

  • Since the Brexit vote, the fall in sterling’s value has led to a rise in imports of used vehicles, with sales of new cars in decline

 

  • Industry figures believe the switch to greener vehicles will stimulate demand

 

  • In the longer term, the development of automated cars could transform the industry and drive a resurgence in sales

2017 was a challenging year for the Irish motor industry, with new car sales falling 10% on the previous year to just over 130,000. How can it fight back?

The market is fluctuating but the industry is still robust, says Gabriel Keane, managing director at Kia Liffey Valley.

“Looking back over the past five years, 2013 was a poor year for sales despite the move to biannual new registrations – 74,000 new car sales,” he says. “But we then saw recovery, up to 147,000 in 2016. Yes, we are experiencing a Brexit-related drop at the moment; but the future, thanks to innovations in terms of automation and green technology, is promising.”

Keane identifies the high levels of innovation in the industry as the element that will keep it afloat. “Look at the aisles of the Geneva Motor Show – the arena is full of new ideas, from electric cars to hybrid cars to automated cars. All this is going to generate interest over the next few years and keep customers interested.”

In the next five to 10 years, Keane argues, “we’ll see quite a change in terms of what cars can do and what they will do for the driver. The car will be safer, and the driver will do less.”

He offers two recent examples as a signal of what will come in the future. “Lane assist: if you’re on the motorway and you veer from your lane, it will gently correct you.” The second is adaptive cruise control: “If you’re driving along at 120kph and you approach someone doing 110kph, as you get closer it will slow down your car.”

The point for Keane is that “we are at the early stages of such automation, but we are going to see more and more over the next few years”.

Cars are also becoming greener, offering further incentives for the customer to buy new vehicles rather than used. “The move away from diesel is happening quickly and, delicate though that may be in itself, this ultimately will help the new car market.”

Ireland’s target year for ending the sale of fossil-fuel-run cars is 2030. Electric vehicle (EV) sales are expected to double in 2018, from last year’s figures of 3,200. Looking forward, EV sales are expected to reach 14,000 a year by 2020.

Overcoming external difficulties

It’s true that Brexit is causing issues, and it’s here that, arguably, most of the current problems can be assigned.

“The Irish economy is doing really well and consumer spending and confidence is strong,” says Alan Nolan, director general of the Society of the Irish Motor Industry (SIMI). “The environment is buoyant, and yet car sales have dipped. We are below normal figures and there’s only really one reason for this, and that’s Brexit.”

While many of the impacts of Brexit may not be felt until after the UK’s withdrawal from the EU next year, Nolan argues that “we entered our Brexit phase as soon as the vote was cast in June 2016, because sterling dropped significantly at that point and this led to a huge influx of used cars coming into Ireland”. In practice, this meant that used car sales “increased by a factor of close to 50% – last year we sold 130,000 new cars and imported 97,000 used ones. This year, the figures will be even closer – we’re heading towards used imports of over 115,000.”

 

“As an industry, it is one of the most exciting to work in at the moment. We’re on the threshold of some very positive times”

 

Alan Nolan, director general, Society of the Irish Motor Industry

If you’re a regular three-year-cycle customer, Nolan argues, when trading your car in “you will find the cost to change your car has increased substantially – perhaps as much as €5,000 – and so this is impacting on the market”.

The solution? “There are very strong finance offers available,” he says. “From the point of view of the customer, it allows them to change the car without committing as much of their finances upfront.”

A pilot industry

Dr Martin Mullins and Dr Finbarr Murphy from the University of Limerick’s accounting and finance department believe that automated cars will be a game changer for the industry: “We are beginning to enter the twilight of the driving era as we know it.” In a few decades, they argue, “it will be rare for humans to be in control of a tonne of metal travelling in excess of 100km per hour”. For anyone with small children, “the likelihood is that they will never drive a car”.

This has considerable positive impacts on new car sales over the mid to long term, and will also bring down insurance claims over time. “As assisted-driving technologies improve, and more long-term, fully-automated driving systems emerge, there is likely to be a steep fall in accident rates.”

Human error is responsible for “the vast majority” of incidents, so as technology replaces the driver, “claims are going to fall over time”. Mullins and Murphy estimate that insurance claims could fall “between 60% and 80% in the next 20 or so years”. This is a further incentive for drivers to buy new vehicles – not only will they be buying safer cars, but their insurance premiums should fall as well, meaning there will be more money available.

And despite his concerns over Brexit, Alan Nolan is confident about the future. “As an industry, it is one of the most exciting to work in at the moment – the change from combustion to electric or low emissions, plus the future for autonomous driving, mean we’re on the threshold of some very positive times.”

Motor manufacturers and suppliers are seen “as something of a pilot industry in terms of technology taking us to a place where we have cars that do not emit anything other than harmless emissions – or none at all if they are electric”. As a result, this is “a great time for those in the industry to identify just how future-looking and positive their role is”.

 

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