Damage wrought by Covid-19 can be repaired as car dealers prepare for a busy H2 season of selling beginning in July.

The recovery of Ireland’s motor industry will begin at full throttle as the busy July H2 sales season kicks into gear this week.

According to the latest Motor Sector News for June compiled by Bank of Ireland’s head of Motor Sector Stephen Healy the motor sector restarted on 18 May 2020 during phase one of reopening the Irish economy.

“The mood in the sector would be one of cautious optimism”

Comparing the six calendar weeks since restart (21-26), combined sales of passenger cars (PC) excluding hire drive¹ and light commercial vehicles (LCV) declined around 35pc year on-year.

Registrations of used imported cars declined around 59pc in the same period. NCT centres that handle VRT appraisals remained closed until 15 June preventing dealers from registering used imported vehicles that were in stock but were not declared to Revenue before lockdown. Registrations of used imports have picked up again with sales down by around 23pc year on year for the period from 15 to 30 June.

The hire drive (HD) market declined by around 80pc in 2020 as car rental companies cancelled orders due the impact of Covid-19 on tourism; thus, HD sales are excluded to understand retail demand.

Covid-19 put a dent in sales

Man in blue suit and blue tie.

Stephen Healy, head of Motor Sector, Bank of Ireland

Healy pointed out that volumes of new passenger car and light commercial vehicle (LCV) are typically low in advance of the second sales peak which commences in July 2020. June typically represents 1pc of new car sales every year whereas July represents 21 percent.

“New car sales fell a staggering 96pc year-on-year in the month of April but this fell back to -35pc from restart on 18 May to the end of June . Those figures might sound horrendous, but actually the sector was expecting it to be much worse.

“Only now are consumers beginning to collect cars that were ordered pre-Covid-19. In talking with stakeholders in the sector quite a number of consumers had postponed collection of their cars until July.”

In terms of passenger car sales, in the first six months, the market declined 34.5pc (to 52,891 units). Toyota holds the number 1 position with 12.2pc market share, followed by Volkswagen with 11.8pc in number 2, Hyundai with 9.9pc in number 3, Skoda with 8.7pc in number 4 and Ford with 6.9pc in number 5.

For light commercial vehicles, in the first six months the market declined 30.9pc (to 10,579 units). Ford holds the in number 1 position with 22.9pc market share, followed by Volkswagen with 16.5pc in number 2, Peugeot with 10.6pc in number 3, Renault with 9.9pc in number 4 and Citroen with 9.0pc in number 5.

Registration of used imports declined 57.1pc (to 22,789 units) in the first six months of 2020.

The return to growth of the sector is top of mind among car dealers, said Healy.

“July represents 21pc of the new car market while July and August combine represent 25pc of the new car market. September to December sales are typically 5pc of the overall year. So July and August are very important for new car sales and from what we can tell consumer appetite is good. Early indications from stakeholders in the sector are positive.

“From a Bank of Ireland perspective motor finance proposals received in the month of June for orders in July are ahead of the previous year and that is encouraging. The mood in the sector would be one of cautious optimism.”

“The motor sector is not just about new cars. Motor dealers are also reporting brisk demand for used vehicles. This is good news for motor dealers, as they would have been carrying peak levels of used stock when we went into lockdown at the end of March”

Recent coverage in the Financial Times suggests that motor dealers may experience a bounce in vehicle sales as people choose to avoid public transport due to Covid-19. Healy said that despite the cautious optimism, pragmatic dealers are doubling down on additional revenue sources such as aftersales service to improve the bottom line but also have focused heavily on health and safety to encourage footfall at dealerships.

“The aftersales channel can account for between 35pc and 40pc of income contribution for the year and therefore it is a critical side of the business for them to grow. In terms of practical steps to protect customers they are notably different to other retail environments as motor showrooms are large spacious premises and have invested in sanitising stations, plexiglass windows, thermometers and signage to ensure physical distancing. Motor dealerships are typically large spaces with typically anything between 5,000 sq ft and 50,000 sq ft with high ceilings and are conducive to ensuring social distancing.”

Deferred Start initiative

Bank of Ireland Finance (BIF) supports 12 motor franchises representing around 40pc of annual new car sales. To support dealers restarting their businesses the bank has rolled-out a new Deferred Payment Start initiative that covers hire purchase, PCP and lease products.

Under the initiative, the first payment date with Hire Purchase, PCP and lease is normally 30 days after the commencement date of the finance agreement. BIF will now allow a customer to avail of up to 90 days before the first payment commences. It must be noted that by deferring repayments at the start of your finance agreement borrowers will pay more interest over the term of the finance agreement than if they started to make repayments from the outset.

“In the last recession a lot of our competitors exited the market and BIF stood up and supported more customers than ever before. So, recognising the success of the past in consultation with our partners we rolled-out the deferred start payment initiative to give consumers a little bit of comfort as they start their experience with a new car.”

Healy concluded: “Bank of Ireland and the Irish motor sector are open for business.”

Written by John Kennedy (john.kennedy3@boi.com)

Published: 3 July, 2020

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