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| Last 10 days as a % |
What benefit is there to a car market to register in excess
of 50% of its monthly registrations in the last 10 days of the month? I have
been trying to figure this out all year and it doesn't make any sense to me for
the motor industry in Ireland to continue to do this. June 2012 saw 4178 units
registered in the last 10 days, a massive 65% of the month’s units! Our year to date report is at this link INSIGHT JULY 2012
With the seasonally adjusted sales rate (SAR) at just 77,000
units for the year the market is suffering from a savage beating at the moment.
Retail sales are falling, and with the availability of credit tightening the
prospect of more sales through finance doesn’t look good. Nor does the prospect of another
scrappage scheme look likely even though some manufacturers are calling for
them across Europe Crisis in Europe.
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| Public consultation on adjusting the CO2 bands |
In fact things could get much worse before there is any sign
of them getting better. The government have called for a review of VRT in
Ireland and whilst this shouldn’t bode badly for the industry it needs to be
very carefully managed.
When it was last reviewed in 2008 the timing couldn’t
have been worse with the new scheme coming in on the 1st July that
year. Effectively it killed sales in the first 6 months and the industry
welcomed in the recession way before it should have done. This can’t be
allowed to happen again.Click here for the VRT detail
IS THE DEALER’S VOICE BEING HEARD?
The reality is that the government needs to generate more
revenue from the industry as their tax receipts are back 72% on 2007 from €1.4
billion to under €400 million last year. It’s highly likely that they will
change the rates around the CO2 emission band and the rumour is that this will be in place
for the budget. I don’t want to tread on any toes with this as I know that the
livelihoods of a lot of people depend on the manufacturers, the industry bodies
and the government getting it right this time.
However I do have concerns, concerns about the government not
listening as well as it could do to what is happening at the coalface. To do that
they need to listen to another voice, not as loud or as well represented as it
could be for a myriad of reasons. That body is the dealerships, the people that
own the dealerships, that run them and that work in them. They are seeing
first-hand what is happening.
WHAT IS THE GOVERNMENT HEARING?
The most immediate issue and the most pressing is the one
that I have started the article with, the pre-registrations that are happening
at the end of the month. With the exception of cash rich dealerships (a
declining species), which can avail of manufacturer incentives and buy
pre-registrations at reduced prices, there is absolutely no benefit to these
dealers to self-register. The pre-registered cars will be sold, however they
will push down the price on used cars, cars in stock that the dealers are
having to absorb (this reality is happening now).
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| 4 year comparison |
At the very same time the government must be hearing a very different
message, a message that is confusing unless you have the full picture. This
message is one that says we are getting our revenue at the end of each month as
the new cars get registered so everything must be OK. Sure they would like new
car sales to increase and therefore earn increased review from the tax. But
they are not absorbing any pain, they are not absorbing direct losses for these
cars and therefore these losses have no direct consequence to them.
BROKEN RIB
Pain is a funny thing. I broke my rib just 3 weeks ago and I
have to say it’s really uncomfortable. For the first week it was awful pain and
I couldn’t sleep, the second week a little less and this week a little less
again. But the pain is still there and I’m taking pain killers daily. Everybody
around me has forgotten I’m in pain of course; the reality is they don’t care and I get
that, however it’s hurting me and I’m having to make a lot of changes to how I
do things because of it.
It’s the same for the government but they just don’t know
it. The dealers out there are really hurting and they are in a lot of pain, but its a pain that the government aren’t feeling which they need to. 34,493 cars have been registered in the last
10 days of six months to June this year so far, 50% of the total cars
registered year to date. If I conservatively suggested that 33% of these cars
were self-registrations then the government has taken around €45million in
revenue this year over and above what they really should have done. THAT WOULD
BE A PAINFUL HOLE IN REVENUE TO PLUG.
REAL MARKET
My belief is that the real retail market is sitting at
around 60,000 units this year and as such the likely revenue from VRT should be around €240 million and not the €310 million that they will likely
get paid. If that revenue was €240 million perhaps they would sit up and take notice, €70 million that’s a big hole in revenue to fill. Its a truer picture of what’s really
happening in the market on which to gauge their decisions on the VRT review.
AND IT DOESN’T INCLUDE ANY OF THE VAT REVENUE THAT WILL BE GENERATED.
Getting back to the dealerships pain though; 5 dealers have
closed their doors within the last 3 weeks and it is rumoured that there are manufacturers who are actively shoring up others. The reality is
that there are still too many dealers for the size of the current market and more will go. What can be
done to avert this?
There are therefore only two things that can be done, either
somehow the market has to see a lift in volumes or more dealers have to close
their doors. Anything the government can do to lift sales will be a welcome boost for the dealers as with this option there is a chance for the government to earn
more revenue in VRT, VAT, PRSI and Corporation Tax. The second option guarantees a
drop in taxation revenue and will result in more dealers closing their doors. The dealers need this message to be heard loud and clear.
My genuine concern is that unless it is discussed in more depth with dealers it will lead to a decision on VRT that, like a broken rib, will be really painful and will take much longer to heal that is avoidable.
If the government increases VRT in whatever way, in a depressed market, it will have major adverse consequences for car dealers, jobs and tax revenues. The industry needs to avoid a repeat of what happened in 2008 by getting this debate on the table now and getting their voice heard loud and clear.
Brian
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