Call for VRT changes in Budget 2021

Sales in Ireland’s motoring sector have been decimated by the Covid-19 crisis.

New passenger car sales have fallen 26pc year-on-year because of the Covid-19 crisis and with Brexit and new emissions rules just around the corner, reform of Vehicle Registration Tax and other creative measures to stimulate sales are needed.

That’s the view of Stephen Healy, head of Motoring Sector at Bank of Ireland who has just published his latest Motor Newsletter.

“The motoring sector in Ireland is seeking a reduction in VRT to avoid a fifth year of lower motor sales in Ireland, to stimulate the sector and also, in keeping with the Government’s Climate Action Plan, reduce carbon emissions”

At the start of the year it was hoped some green shoots would emerge that would set the industry in the direction of its peak new car sales of 2016 when 146,000 units were sold. Subsequent Brexit jitters, a weakened Sterling and a rise in new car imports saw car sales decline to 117,000 units in 2019 and it was hoped that the introduction of the Nitrogen Oxide levy in January 2020 would reduce demand for older, used imports.

Hopes were further dampened in March when Ireland went into lockdown in response to the Covid-19 crisis. With a no-deal Brexit more certain as well as the introduction of the Worldwide Harmonised Light Vehicle Test Procedure, the industry will be under more pressure than ever before.

A perfect storm

Man in blue suit and blue tie.

Stephen Healy, head of Motoring Sector, Bank of Ireland

According to Healy, the motoring sector in Ireland is looking next week when Finance Minister Paschal Donoghue will deliver Budget 2021 to the Dail. The industry is hoping that Budget 2021 will include measures that will not only stimulate new car sales, but also sales of newer but second-hand lower-emission models.

“Policymakers need to look at what they can do to support the sector. Last year the Government took the decision to introduce the NOx levy and it had its intended effect of reducing the importation of older, more pollutant used cars. But along came Covid-19 and now we are in extraordinary times and extraordinary measures are needed.”

Healy pointed to calls by the Society of the Irish Motor Industry (SIMI) for reform of the Vehicle Registration Tax (VRT) especially in light of the new WLTP rules which involve more “real world” testing and produce higher emission results. Since motor taxation in Ireland uses CO2 emissions as the basis for calculating these taxes.

He warned that without intervention from the Irish Government, the implementation of WLTP would bring higher retail prices for consumers in 2021 and reduce demand for new cars. This poses a significant threat to motor dealers here.

As a result, consumers will hold onto ageing more pollutant cars which would be contrary to Government plans to reduce carbon emissions. The Irish Government plans to ban the sale of new petrol and diesel vehicles by 2030, as part of the Climate Action Plan. This is widely seen in the motor sector here as unrealistic and contrasts significantly to the EU target date of 2040.

Healy suggested policymakers need to look at policy decisions in countries like France that have introduced subsidies to encourage people to trade in older cars for newer ones. The subsidies apply to both new and used cars and are pragmatically designed to be in line with buyers’ salaries so that the measures can apply to all levels of the economy.

“The average car on the road in Ireland is nine years old. Such measures would assist in improving car sales and the uptake of newer vehicles that produce considerably less carbon emissions.”

“The motoring sector in Ireland is seeking a reduction in VRT to avoid a fifth year of lower motor sales in Ireland, to stimulate the sector and also, in keeping with the Government’s Climate Action Plan, reduce carbon emissions.

“It would promote and stimulate the purchase of newer, lower emission vehicles, including newer second-hand vehicles.”

Crucially, innovative measures by the Government would help retain the current momentum in the sector, which despite seeing sales decimated because of Covid-19 is nonetheless revving up.

In the nine months to the end of September new car sales are down almost 26pc . In the 19 weeks since restart, new car sales are almost on a par with 2019 when comparing volumes year on year (excluding hire drive). This is an indicator of a sector in recovery, but still a long way off 2016 levels. Volkswagen holds the #1 position with 12.1pc market share, followed by Toyota with 11.7pc in #2, Hyundai with 9.3pc in #3, Skoda with 8.3pc in #4 and Ford with 7.8pc in #5.

Registrations of used imports declined 40.3pc (to 49,190 units) in the first 9 months of 2020.

“With Covid-19, Brexit, WTLP and climate action challenges, it really is a perfect storm for the sector. So there are quite a few challenges on the  horizon.

“Hopefully these issues will be addressed in Budget 2021 with appropriate measures to help the industry to get back on its feet again and face off challenges posed by WTLP and Brexit.”

By John Kennedy (

Published: 6 October, 2020