While new and used car sales for July beat expectations, the road ahead remains challenging for the motor sector.
Car sales since the motoring sector reopened 11 weeks ago are ahead of expectations providing the industry with reason for cautious optimism, said Stephen Healy, head of Motoring Sector at Bank of Ireland.
He said that sales of new cars are down by just 3.7pc in the 11 weeks since restart compared with the same period in 2019.
“The market for new and used cars in July turned out to be more robust than was expected or hoped”
According to the latest Motor Industry Newsletter for July, new car sales declined 14.1pc versus July 2019 with 21,313 cars sold compared with 23,681 during the same period last year.
However, hire drive (HD) sales collapsed 98.3pc in July with just 64 units sold compared with 4,000 in 2019.
Providing an early indicator that July would be ahead of expectations, Healy said that Bank of Ireland Finance experienced higher levels of motor finance applications and approvals in June than in the previous year.
When HD registrations are excluded, cumulative new car and van sales were marginally ahead in July year on year, increasing 0.2pc.
“July is a key selling season for the car industry, traditionally representing 21pc of annual car sales compared with 1pc usually in June,” said Healy.
Healy said the industry fared better than expected. “The feeling was that sales would be down 50pc due to declines in tourism and the general economic environment and consumer confidence. The motoring sector opened up in late May and formed the first part of the reopening of the Irish economy. From talking to dealers their order bank going into June began to look reasonably solid.
“The market for new and used cars in July turned out to be more robust than was expected or hoped.”
Healy said there could be many reasons for the market holding firm, including the likelihood that money usually spent on holidays was going into new vehicles as well as people avoiding public transport on health and safety grounds.
In terms of passenger car sales, new vehicle sales were down almost 30pc in the year so far to 75,069 units. Volkswagen still holds the number one position with 11.99pc of the market, followed by Toyota with 11.98pc of the market, Hyundai with 9.6pc of the market, Skoda with 8.5pc of the market and Ford with 7.5pc of the market.
Registrations of used imports declined 49.6pc to 31,351 units in the first seven months of 2020.
The road ahead
“The demand is really strong for used car sales and as a result the industry is able to hold their margins and reduce their exposure”
Looking to the rest of 2020, Healy emphasises the mood of “cautious optimism” in the motoring trade. “I say ‘cautious optimism’ rather than optimism because there are still so many factors that can impact the market. Attitudes around returning to work, the Government’s economic stimulus plan, bringing kids back to school and fears around a second wave of Covid-19 all play a part.
“Looking to the end of the year it is likely the market is going to finish down 30pc unfortunately this year and that is due to the fact that the market was closed for most of the second quarter. Traditionally August to December represents only 10pc of annual car sales.
“The focus in the industry for the rest of the year will be on used car sales and workshop business.
“The sector is telling us that used car sales are actually flying again which is very encouraging as it gives the industry a chance to get its stocks under control. The demand is really strong for used car sales and as a result the industry is able to hold their margins and reduce their exposure.”
Another aspect Healy said that could be pivotal for the motoring industry in Ireland will be the October Budget as eyes will be on whether the Finance Minister will announce measures in relation to specific industry supports and emissions levies. Last year, for example, the imposition of a nitrogen oxide (NoX) emission levy was to play a key role in helping the local industry lower the impact of used car imports.
A possible green shoot indicator for the wider economy, Healy said was that demand for light commercial vehicles (LCVs) is also recovering with the market declining just 5.5pc in July.
“This highlights to me a returning confidence within the SME market to invest in commercial vehicles,” Healy said.
Written by John Kennedy (firstname.lastname@example.org)
Published: 7 August, 2020