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Bernard Feeney, Managing Director,

Goodbody Economic ConsultantsTel: 353 1 641 0482 Fax:353 1 668 2388

www.goodbody.ie/consultants/

2011 and Beyond – an Economist’s view of the Car

Market

16 November 2010

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Purpose of the Presentation

To provide an outline of economic growth trends and prospects

To set out what is happening to car ownership, traffic volumes and new car sales

To provide a perspective on when a recovery in these markets might be expected

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Trends in GDP & GNP 2006-2011

Source: CSO & Central Bank

-12%

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

2006 2007 2008 2009 2010*

% Change in GDP % Change in GNP

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Economic Performance

After ten years of unprecedented growth, Ireland’s economic fortunes changed dramatically in 2008

GNP fell by 2.8 per cent in 2008 and by a further 11.3 per cent in 2009

2010 forecasts estimate a decline of over 1 per cent, so that GNP will have fallen a total of approximately 15 per cent from its peak

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By 2010, consumer expenditure will have fallen 10 per cent from its peak

Source: CSO & Central Bank

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

2006 2007 2008 2009 2010*

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Household Savings Ratio Rising Rapidly

0%

2%

4%

6%

8%

10%

12%

2007 2008 2009 2010

Source: Bank of Ireland

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Consumer Confidence has Collapsed

Source: ESRI

0

20

40

60

80

100

120

Jan

-01

Ap

r-0

1

Jul-

01

Oct

-01

Jan

-02

Ap

r-0

2

Jul-

02

Oct

-02

Jan

-03

Ap

r-0

3

Jul-

03

Oct

-03

Jan

-04

Ap

r-0

4

Jul-

04

Oct

-04

Jan

-05

Ap

r-0

5

Jul-

05

Oct

-05

Jan

-06

Ap

r-0

6

Jul-

06

Oct

-06

Jan

-07

Ap

r-0

7

Jul-

07

Oct

-07

Jan

-08

Ap

r-0

8

Jul-

08

Oct

-08

Jan

-09

Ap

r-0

9

Jul-

09

Oct

-09

Jan

-10

Ap

r-1

0

Jul-

10

Oct

-10

Consumer Confidence

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Government’s Four Year Plan

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2011 2012 2013 2014

(%) Change in GDP

Source: Department of Finance

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Implication for Consumer Spend

0.00.20.40.60.81.01.21.41.61.82.0

2011 2012 2013 2014

(%) Change in Consumption

Source: Goodbody Estimate

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Future Prospects

Major fiscal tightening up to 2015

Growth in consumer spending will be modest

Recovery will be export led

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Vehicle Ownership 1999-2009

Source: Department of Transport

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Good Vehicles Cars

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Vehicle Ownership

In 2009, the national car parc stood at 1,902,429 ( down 1.1% on 2008)

Good Vehicles declined by 2.1 per cent in 2009

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Total National Road Traffic Volumes 2007-2010

Source: NRA

02,0004,0006,0008,000

10,00012,00014,00016,00018,00020,000

2007 2008 2009 2010

AADT

-4.6%-2.0%0.9%6.6%

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HCV National Road Traffic Volumes 2007-2010

Source: NRA

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2007 2008 2009 2010

AADT HCV

5.9% -5.3%

-13.1%-4.3%

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Freight Vehicle Km 1999-2009

0

500

1,000

1,500

2,000

2,500

1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Yr

Million

Vehicle Kilometres

Source: CSO

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Forecast Vehicle Kilometres 2009-2025

0

10,000

20,000

30,000

40,000

50,000

60,000

Cars VKM Goods Vehicles VKM Total VKM

Source: Goodbody Economic Consultants

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Performance of New Cars Sales

Source: CSO

0

50,000

100,000

150,000

200,000

250,000

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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Trend in Premium New Car Sales 2000-2010

Source: SIMI

*2010 Year to September

0

5,000

10,000

15,000

20,000

25,000

30,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

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Proportion of Premium New Car Sales

(%)

2000 7.52001 11.32002 11.42003 12.22004 12.62005 13.22006 13.52007 14.22008 14.42009 11.72010 10.7

Source: Goodbody Estimate

*2010 Year to September

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Ratio of Car Sales to Car Parc 1986-2009

0.000.020.040.060.080.100.120.140.160.18

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

Ratio of NCS: Car Parc

Source: Department of Transport & CSO

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Future New Car Market Scale

Goodbody modelling predicts a car parc of 2m by 2020

If the ratio of new car sales to the car parc stabilises at 9 per cent, then…….

The “target” level of new car sales is c. 180,000 units

When will this be reached?

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Goodbody Model Predictions Based on 4 year Plan

Source: Goodbody Economic Consultants New Car Sales Modelling

20,000

70,000

120,000

170,000

220,000

270,000

1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018

Ca

r S

ale

s

Actual New Car Sales Predicted New Car Sales (per cap)

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Conclusions

The economic crisis is reducing ownership and vehicle traffic and it will take at least five years for car traffic volumes to recover and much longer for freight traffic volumes

Despite the resurgence in the new car market in 2010, a sustained and substantial recovery of the market will be slow to emerge

In more normal economic conditions, a target market of 180,000 units per annum could be expected

This is unlikely to be achieved any time soon, although unravelling of the high savings ratio could lead to an unexpected good market performance on occasion over the medium term.

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Additional Slides

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% Change in Exports 2006-2011

Source: CSO & Central Bank

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

2006 2007 2008 2009 2010*

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Freight Traffic

Freight Vehicle Kilometres declined 32% from its peak in 2007

The largest decline in freight vehicle km occurred in the building and construction sector - down 63% on 2007

Excluding construction related activities the remaining freight vehicle kilometres only declined 29% between 2007 and 2009

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Goodbody Modelling of the Geographic Distribution of Expenditure on New Cars Sales by

DED

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Fuel Split of New Car Sales

The proportion of new diesel vehicles has been increasing over time

In 2009 56.3 per cent of new car sales were diesel

As of July 2010, the proportion of new diesel cars stood at 63.5 per cent

Fuel Split in New Car Sales 1998-2009

0.010.020.030.040.050.060.070.080.090.0

100.0

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

% Diesel % Petrol % Other

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Emissions

The move to diesel vehicles has contributed to reduced levels of CO2 emissions

In the 2005-2009 period CO2 emissions from passenger cars declined for the first time in 15 years

Should 2010 car sales continue and emulate the car fleet, there would be a 24 per cent reduction on current CO2 emission levels

Aggregate passenger car fleet Dec 2009

New cars registered in first half of 2010

CO2 emissions per vehicle/km (g/km)

178

134

Emissions per Passenger Car Km for Aggregate Car Fleet and New Car Fleet