Irish motor sector weathers storms and stays the distance

Podcast Ep 46: In weathering the turbulent pandemic and Brexit storms, the Irish motoring sector proved its resilience and is ready for the road ahead, says head of Motor Sector at Bank of Ireland Stephen Healy.

Mirroring trends seen across the EU and UK, the Irish motoring sector saw new car sales rise 5pc coming out of the first lockdown in 2020 while used car demand remains strong.

Either way the impact was felt across the entire sector with overall sales down 25pc compared with an EU average of 24pc, according to Bank of Ireland head of Motor Sector Stephen Healy.

“I expect continued resilience in 2021 as demand trends carry over from 2020”

In his latest Motor Sector News edition, Healy pointed out that January 2021 began with less of a roar than January 2020, with new car sales in January down 17.8pc year-on-year with the additional challenge of two less working days.

Speaking with ThinkBusiness, Healy explained that when adjusted for the number of days new car sales would have been down 10pc. “Some  30,000 new vehicles were registered in January, which is extraordinary given the circumstances and highlights underlying demand. Many consumers were able to visit garages in December and placed orders for January.

If anything, Healy says the sector managed to stabilise their businesses and minimise disruption during the various lockdowns by maintaining after sales services but also transitioning in good order to digital as cars can be bought remotely and financed remotely with many dealerships offering a “click and collect” service in 2020 (replaced with “click and deliver” in Jan 2021).

The road ahead

“I expect continued resilience in 2021 as demand trends carry over from 2020. There is a 2pc VAT reduction in place until 28 February which may encourage some customers to buy cars remotely while the saving is in place.

In terms of Brexit, Healy said that Rules of Origin requirements will see tariffs applied to the majority of UK used car imports. Prior to this there was a correlation between the decline in Sterling’s value and the rise in used imports. However, since 1 January the process for importing a car from the UK will have changed materially with customs declarations, administration costs and a 10pc tariff adding to costs. This is likely to lead to a drop in privately imported vehicles to Ireland.

“That said, motor dealers are likely to continue to import from the UK where they see value”.

Another factor of Brexit to bear in mind will be the increased lead-times, at least temporarily, for vehicle parts distributed from the UK.

In January, Toyota holds the #1 position with 15.0pc market share, followed by Hyundai with 10.8pc in #2, Volkswagen with 10.1pc in #3, Ford with 9.1pc in #4 and Skoda with 8.2pc in #5.

In terms of light commercial vehicles, Ford holds the #1 position with 22.5pc market share, followed by Peugeot with 12.5pc in #2, Renault with 11.1pc in #3, Volkswagen with 10.5pc in #4 and Citroen with 10.5pc in #5.

“My feeling is demand will return to the sector once Covid-19 restrictions are lifted. If I said in July last year that by Jan 2021 there would be vaccine, Trump would be out of office and Brexit would be done it would have been a reason to celebrate. But challenging times still exist. The outlook remains cautiously optimistic. Brexit will continue to evolve, and we’ll keep a close eye on developments.”

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By John Kennedy (john.kennedy3@boi.com)

Published: 8 February 2021