simi motor industry review with donedeal

8/12/2019 SIMI Motor Industry Review With DoneDeal

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A report by Economist, Jim Power


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A report by Economist, Jim Power 1

About Jim Power 4

About SIMI 4

About DoneDeal 4

Executive Summary 5

Economic background to the Irish Motor Industry 8

Key Economic Dynamics Q1 2014 10

The Retail Sector 10

Export Performance 10

Manufacturing Activity 10

Exchequer Finances 10

Credit 11

Labour Market 11

Consumer Confidence 13

Overall Assessment 14

The Motor Industry 15

Recent Trends 15

Trends in Commercial Vehicle Registrations 20

Economic and Financial Contribution of the Motor Industry in

Ireland 22Employment 22

Exchequer Contribution 23

The first quarter of 2014 25

New and Used Car Sales 25

Tax Receipts Q1 2014 29

Motor Dealerships 29

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Employment 30

Cost of Motoring 30

Market Issues 32

DoneDeal Motor Report Q1 2014 35

New vehicles 37

Used vehicles 39

Vehicle servicing 40

Vehicle parts 41

Vehicle body repair 42

Finance 43

Employment 44

Apprentices 45

Outlook for year ahead 46

Appendix 47

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About Jim Power

About SIMI

About DoneDeal

4

Jim Power is owner manager of Jim Power Economics

Limited, an economic consultancy. In 2013, he co-founded

CJP Consultants with Economist Chris Johns. He isEconomic Advisor to the Friends First Group and was

previously Treasury Economist at AIB Group and Chief

Economist at Bank of Ireland Treasury. Jim writes a weekly

column in the Irish Examiner and Sunday Business Post

online edition. He has lectured on the full-time and part-time

MBA at Smurfit School of Business UCD, and on the Local Government MBA at

DCU. He is a board member of Agri-aware, the food awareness body and is

Chairperson of Love Irish Food. Jim is a native of Waterford and comes from a

farmin back round.

The Society of the Irish Motor Industry Motor Industry (SIMI) is

the national representative body for the Motor Industry in

Ireland. The launch of the Motor Industrys first Quarterly

Report marks a change from our previous approach of

commissioning an Economists review of the Industry once a

year in advance of developing our pre-Budget Submission. The

concept with this report is to review not just the businesshealth of the Industry on a quarterly basis but also to collate information from

various sources to help develop a wider picture of where our sector fits into the

overall economy and into the social life of the country. We would wish to thank

the Reports author, Economist Jim Power, and to acknowledge the support of

the sponsor and our partner in this project, Done Deal.

DoneDeal, Ireland's largest and most successful onlinemotor sales website are delighted to partner with SIMI

to present a comprehensive overview of both the

private and trade motoring market in Ireland. With over 955,000 registered

users and over 28 million visits to our motor section already in 2014, DoneDeal

are providing data that gives a true reflection of the rapidly growing online

market for the country. The value of private goods sold in DoneDeal's Motor

Section increased by over !30 million in Q1, 2014 to !280 million, with over

60,000 private cars sold in this period representing a significant economic

impact and highlights the importance of the private car buying and selling

market. On behalf of DoneDeal, I would like to thank all those involved increating and publishing this insightful industry report.


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Executive Summary" After more than five very di#cult years for the Irish economy, 2013 saw a

stabilisation and some recovery. This trend of gradual improvement was sustained

in the first quarter of 2014. The export sector is doing well; the labour market

continues to strengthen; the public finances are continuing to improve, particularlytax receipts; business and consumer confidence continue to improve; and

consumer spending is showing modest growth. Car sales are making the biggest

contribution to the growth in consumer expenditure.

" There are still many challenges to be tackled before the economy can be

considered to be approaching normality. Sovereign, personal and SME debt levels

are dangerously high; the banking sector is still not in a position to supply

necessary levels of credit to the economy, although motor dealers are seeing an

improvement in credit to the auto industry; personal discretionary incomes are still

being pressurised, which is putting considerable pressure on discretionary

spending; and a further fiscal adjustment of %2 billion is scheduled for Budget

2015, which is due to be delivered in October.

" While all of these domestic issues will have to be addressed and worked through,

the key risk to the Irish economic outlook is still posed by external developments.

Provided the external environment maintains a modest recovery trajectory, the

Irish economic environment should continue to move in the right direction in a

gradual fashion.

" Conditions for the motor trade have been very challenging since 2007 against a

background of a sharp correction in the overall economy and particular problems

for consumers. Between 2007 and 2013, retail sales excluding the motor trade

have declined by 11.8 per cent in volume terms and by 16.8 per cent in value

terms. Over the same period, retail sales in the motor trade declined by 43 per

cent in volume terms and by 49.8 per cent in value terms.

" The motor sector makes a very strong contribution to the Irish economy through

the employment that is created in sales and servicing, and the contribution to the

Exchequer through taxes on employment, but also through the VAT and VRT

payable on vehicle sales. In addition, the motor industry is spread geographically

around the country and makes a very strong contribution to economic activity in

the regions, including small towns and many villages.

" Employment in the motor trade stood at 37,400 in the final quarter of 2013. This is

12,100 down on the peak employment level of 49,500 in the final quarter of 2007.

Employment levels stabilised in 2013 and are starting to show some modest

growth. It is estimated that for every extra 1,000 new car sales, 130 additional

employees are hired in the industry.

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" The motor industry makes a very strong contribution to the Exchequer finances.

The total tax take peaked at almost %1.8 billion in 2007 and then declined by

almost 80 per cent by 2009. In 2013 new and used car sales contributed a total of

almost %763 million to the Exchequer. These figures clearly show the potential that

a normal car market can make to the Exchequer.

" The first quarter of 2014 saw a strong recovery in vehicle sales, reflecting ongoing

improvements in consumer and business confidence. The number of new private

cars licensed for the first time reached 39,366, which represented an increase of

27 per cent on the first quarter of 2013; New goods vehicles increased by 50.9

percent; New tractors increased by 28.6 per cent; and total new vehicles licensed

increased by 29.2 per cent.

" Motor dealers report that during the first quarter of 2014, the number of Enquiries

in the show room was 37 per cent higher than the first quarter of 2013 and thenumber of Orders increased by 62 per cent.

" Average C02emissions from newly registered cars have been declining steadily

since 2008. Average emissions in 2013 were almost 24 per cent lower than in

2008. This trend towards environmentally friendlier cars has continued in the first

quarter of this year, with average emissions 4.8 per cent lower than a year earlier.

" Every county has experienced a strong rebound in new car registrations, ranging

from Leitrim with the strongest growth of 57.6 per cent to Dublin with the lowest

growth rate of 16.6 per cent. However, Dublin accounted for 36.4 per cent of thenational market in the first quarter.

" A survey of SIMI members show there is a greater level of optimism in the industry

at the moment than we have seen for some time. However, the sense of optimism

is tinged with a realistic level of caution.

" The trend in classified ads carried by DoneDeal is indicative of the growing

importance of web-based sales in the second-hand car market.

" There are still many issues facing the Irish auto industry, but it is now moving in

the right direction. The issues include the age of the car fleet; the increased

penetration of imports; personal discretionary incomes are still pressurised; and

there are legacy debt issues. It is essential that nothing is done to undermine the

fragile recovery in the sector.

" Sales this year look set to exceed 85,000 and could be as high as 90,000. From

the perspective of the motor industry and the safety and age of the car stock, the

minimum level of sales required to maintain the current dealer network is around

100,000 per annum. The Motor Industry supports 37,000 jobs throughout 400

towns in Ireland. New car sales help to contribute to activity throughout the Motor

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Industry, we have already seen how a drop in the market in 2009 and 2010 led to

a situation where older stock is not available and therefore must be imported.

" Looking ahead to the market over the next three years, it is certainly possible that

the market could breach 100,000 in 2015; 110,000 in 2016 and 120,000 in 2017.

For every increase of 10,000 in car sales, an extra %82 million would accrue to the

Exchequer. In terms of employment, it is estimated that every 1,000 cars sold

supports 130 jobs in the industry, so 10,000 extra sales would support an extra

1,300 jobs. All of this would of course be dependent on a continuation of the

current improving economic trend and the absence of any additional or increased

negative taxation burdens on car purchases/ownership over the period in question

" The strong growth in new car registration during the first quarter of 2014 has

resulted in a much stronger contribution to the Exchequer finances. In total in the

first quarter, the Exchequer collected%453.7 million from new and used car sales.

This was %97.4 million (27.3 per cent) higher than the first quarter of 2013. It

accounted for almost 5 per cent of total tax revenues collected in the first quarter.

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Economic background to the Irish

Motor Industry

The Irish economy has experienced a dramatic shock since 2007, but over the past18 months there has been growing evidence of stabilisation and some recovery in

certain aspects of the economy. In general terms 2013 was a challenging year, but

while some parts of the economy experienced recovery, other parts continued to

operate in a very challenging environment.

On the surface the overall data for 2013 are somewhat confusing and di#cult to

interpret. Gross domestic product (GDP) contracted by 0.3 per cent, but gross

national product (GNP) expanded by 3.4 per cent. In Budget 2013 which was

presented in December 2012, the Department of Finance had forecast real GDP

growth of 1.5 per cent in 2013 and real GNP growth of 0.9 per cent. So GDP turned

out significantly weaker than expected, but GNP turned out considerably stronger.

Source: CSO

In seeking to interpret what is really going on in the economy, it is important to

distinguish between the two measures of economic activity, GDP and GNP.

GDP is the total value of goods and services produced in the economy in a given

time period. On the other hand GNP is basically that part of GDP that ends up in the

pockets of Irish residents. The di&erence between the two measures is called net

factor income from the rest of the world. This primarily consists of the di&erencebetween the profits that foreign-owned companies operating here send back to

GDP GNP

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their home country and what Irish companies operating overseas send back to

Ireland; and interest on the foreign component of Irelands national debt. The

preliminary data for 2013 show that GDP totalled %164 billion and GNP totalled

almost %138 billion. Hence there were net factor outflows of %26 billion last year.

In assessing what the latest data tell us, it is instructive to examine the key

components of economic activity last year.

Personal consumer expenditure declined by 1.1 per cent. This includes

consumption of both goods and services. The sales of goods expanded by

0.2 per cent, but the sales of services declined by 2.3 per cent. These data

are totally consistent with the challenging environment that most businesses

dealing with the stretched personal sector experienced during 2013. Indeed,

during the final quarter of the year, personal consumption declined by 0.2 per

cent. Gross Domestic Fixed Capital Formation (which is basically investment in

machinery & equipment and construction output) increased by 4.2 per cent in

2013. Within this category overall construction output increased by 11.6 per

cent, with new dwellings down by 0.2 per cent and other building &

construction up by 14.3 percent. Investment in machinery & equipment

declined by 4.8 per cent, but if we exclude the fact that investment in new

aircraft was %1.7 billion lower last year than in 2012, this category would have

grown by 16.3 per cent.

Exports of goods & services increased by just 0.2 per cent, while imports

increased by 1 per cent. The weak export performance reflected the patent

issue in the Pharmaceutical sector. A number of blockbuster drugs

manufactured in Ireland have come o&patent protection over the past couple

of years. When the patent protection ends, generic drugs enter the market at

significantly lower prices and the value of production and exports falls

significantly. This reduction in pharmaceutical exports meant that fewer

royalties had to be paid to the home country and lower profits were earned,

meaning that the net factor outflows were more than %5 billion lower than

2012. This primarily explains the disparity between GDP and GNP growth last

year.

The overall assessment is that during 2013, the economy was bumping along the

bottom, but started to show some real signs of improvement. Construction and

agriculture are expanding; excluding the Pharmaceutical sector the export

performance is good, but the consumer side of the economy remained quite

challenged.

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Key Economic Dynamics Q1 2014

The Retail Sector

In 2013, the value of retail sales was 0.2 per cent lower than 2012, but in volumeterms, sales increased by 0.7 per cent. The di&erence between volume and value

growth shows that consumers are still very resistant to higher prices and retailers

are being forced to discount prices to shift volume. This has significant implications

for management of margins in the still challenged retail sector.

In the first quarter of 2014, the value of retail sales was 5.6 per cent higher than the

same period in 2013, and the volume of sales increased by 7.9 per cent. However,

when the motor trade is excluded, the growth in retail sales was much more modest

the value of sales increased by 0.5 per cent and the volume of sales increased by

2.6 per cent. The auto industry has been the key driver of consumer spending so farin 2014!

Export PerformanceThe value of merchandise exports declined by 5.2 per cent in 2013. This is

disappointing, but is attributable to the impact of patent expiry in the

Pharmaceutical sector. Last year, exports of Chemicals & Related Products declined

by 8.4 per cent, but exports of Food & Live Animals increased by 7.6 per cent and

Machinery & Transport Equipment (includes IT sector) increased by 1.1 per cent. InJanuary 2014, merchandise exports increased by 4.5 per cent. Exports of

Chemicals & Related Products increased by 5.6 per cent; Food & Live Animals

increased by 9.2 per cent and Machinery & Transport Equipment declined by 2.8

per cent.

Manufacturing ActivityIn the first 2 months of the year the manufacturing output was 2.3 per cent stronger

than the same period in 2013. The modern sector, which comprises a number ofhigh technology and chemical sectors, was down 1.3 per cent, while the traditional

sector, which comprises indigenous sectors such as food, expanded by 3.2 per

cent. Output of Food expanded by 11.6 per cent; Chemicals & Pharmaceuticals fell

by 0.3 per cent; and output of Computer, Electronic, Optical & Electrical Equipment

declined by 12.9 per cent.

Exchequer Finances

The Exchequer finances continue to improve. In the first quarter of the year anExchequer deficit of %2.3 billion was recorded, which was %1.4 billion lower than the

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same period last year. Tax revenues are running %257 million ahead of target, while

overall gross Government expenditure is running %164 million lower than expected.

The overall taxation data are consistent with a stronger labour market and stronger

consumer spending, particularly on cars. Car sales were 26.5 per cent ahead of the

first quarter of 2013.

CreditThe overall credit situation is still challenging. In the year to February, credit

outstanding to business declined by 5.6 per cent, credit outstanding for mortgage

purposes declined by 3.1 per cent and credit outstanding for other consumer loans

fell by 8.3 per cent. The overall economy is still not getting su#cient credit to fuel a

meaningful and sustainable economic recovery. This is the major challenge in the

economy right now. Within the motor industry, credit is seen as less of a constraint.In the Q1 survey of SIMI members, it is clear that there has been some improvement

in both retail and wholesale finance since the first quarter of 2013.

Labour MarketLabour market conditions are continuing to get better. In February, the number of

people signing on the live register fell below 400,000 for the first time in five years

and this trend continued in March. The unemployment rate has fallen to 11.8 per

cent of the labour force, which is just below the Euro Zone average of 11.9 per cent.It is possible to argue that some of this reduction is due to people deciding to

withdraw from the labour force, or leave the country. However, the number of

people actually at work in the economy is more di#cult to argue with. Data

contained in the Quarterly National Household Survey (QNHS) showed that in the

year to the end of December, employment increased by 60,900 to reach just over

1.9million. In the final quarter of 2010, employment stood at just over 1.85 million.

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Source: CSO

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Consumer ConfidenceDespite the ongoing pressures in the economy, consumer confidence is getting

steadily better (Figure 3). It reached the highest level in almost seven years in

February. Confidence is being supported by the improving labour market, a belief

that the economy has turned the corner, and that the bulk of the painful fiscaladjustment is now almost complete. However, the challenge now is to convert the

improvement in consumer confidence into stronger spending. The imminent

payment of the full-year 2014 Local Property Tax (LPT) will extract at least %550

million out of the economy over the coming months and will have a dampening

e&ect on overall consumer spending. In addition, discretionary incomes are being

undermined by higher health insurance costs, transport costs and other consumer

spending areas. Water charges await the consumer early in 2015. On a more

supportive note, the ongoing improvement in employment conditions, modest

growth in wages, and growth in personal disposable incomes will be supportive ofconsumer spending.

Source: CSO

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Overall AssessmentIn the first quarter of 2014 the economy has continued to build on the progress that

was made during 2013. Confidence levels at both the business and consumer level

are continuing to improve; the public finances are gradually being restored to health;

the export performance is strong, notwithstanding the manner in which the patentissue is impacting on Chemical & Pharmaceutical output; employment creation is

picking up and the unemployment rate has fallen below the Euro Zone average; and

consumer spending is modestly stronger than last year.

Despite the positive progress, there are still many challenges to be tackled before

the economy can be considered to be approaching normality. Sovereign, personal

and SME debt levels are dangerously high; the banking sector is still not in a

position to supply necessary levels of credit to the economy; personal discretionary

incomes are still being pressurised, which is putting considerable pressure on

discretionary spending; and a further fiscal adjustment of %2 billion is scheduled for

Budget 2015, which is due to be delivered in October.

While all of these domestic issues will have to be addressed and worked through,

the key risk to the Irish economic outlook is still posed by external developments.

The US economy is doing reasonably well; the UK economy continues to surprise

on the upside; but the Euro Zone economy remains is a di#cult economic

environment that is characterised by low growth, high unemployment, high levels of

sovereign debt, and deflationary threats. The ECB will have to keep interest rates at

least at current historically low levels, but may have to resort to Quantitative Easing

(QE) of money supply to prevent the Euro Zone economy from becoming stuck in a

Japanese-style deflationary spiral.

Provided the external environment maintains a modest recovery trajectory, the Irish

economic environment should continue to move in the right direction in a modest

and gradual fashion. '

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The Motor Industry

Recent Trends

Conditions for the motor trade have been very challenging since 2007 against a

background of a sharp correction in the overall economy and particular problems

for consumers. In real terms, consumer spending declined by 7.1 per cent between

2007 and 2013 and in nominal terms, total spending declined by 10.3 per cent

Source: CSO

Retail sales represent an important component of overall consumer spending,

accounting for around 44 per cent of the total, with the other 56 per cent accounted

for by spending on various services.

Retail sales have weakened sharply since 2007, but the weakness has been

concentrated in the motor trade.

Between 2007 and 2013, retail sales excluding the motor trade have declined by

11.8 per cent in volume terms and by 16.8 per cent in value terms. Over the same

period, retail sales in the motor trade declined by 43 per cent in volume terms and

by 49.8 per cent in value terms (Figure 5).

REAL NOMINAL

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Source: CSO

New cars licensed reached 180,754 in 2007, fell to just 54,432 in 2009, and

subsequently received some boost from the car scrappage scheme to reach 86,932in 2011, but declined to just 71,348 in 2013.

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Motor Trade Volume Motor Trade ValueRetail Sales ex-Motor Trade Volume Retail Sales ex-Motor Trade Value


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Source: CSO

In line with the sharp decline in new car sales, there has been a significant increase

in the market penetration of imported used cars. In absolute terms, the number of

imported cars peaked at 60,091 in 2008, accounting for 24.5 per cent of total car

registrations. In line with the downturn in the economy and in consumer spending,there has been a decline in the number of imported cars to 38,469 in 2012. There

was some recovery in 2013 to reach 49,762. In 2013, imported cars accounted for

41.1 per cent of total cars licensed (Figure 7).

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New cars Second hand cars


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Source: CSO

There is a di&erence between vehicle licensing and vehicle registration. The O#ce

of The Revenue Commissioners has responsibility for the compilation of vehicleregistrations, while the Department of Transport, Tourism & Sport has responsibility

for vehicle licensing. The licensing process where applicable, follows the registration

process. Registration and licensing figures may di&er in a given month for a number

of reasons. These include:

" Vehicles which under an old system would have been licensed in the latter part of

a particular month may not now be licensed until a later month because of the

time lapse between registration and first licensing; and

"Registered vehicles which are not used in a public place, such as tractors that areexclusively used inside the farm gate, may not need to be licensed.

In practise, on a monthly basis, the licensing data is probably a better reflection of

vehicle sales, as in some cases vehicles may be registered by a dealer in advance

of sale. Typically, vehicles are only licensed at the point of sale.

NEW CARS (%)IMPORTED CARS (%)

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Figure 8 shows the trends in and the di&erence between vehicles licensed and

registered.

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Registrations Licensed

Source: CSO & SIMI

In 2013, there were 74,303 new passenger cars registered, which represented a

decline of 6.6 per cent compared to 2012. This compares to 71,348 new

passenger cars licensed for the first time, which represents a decline of 6.4 percent compared to 2012.


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Trends in Commercial Vehicle Registrations

Registrations of commercial vehicles also fell very sharply in line with the collapse in

business investment spending and the overall economy after 2007.

Light Commercial Vehicle registrations peaked at 44,056 in 2007, but by 2009 had

collapsed to 9,267. There has been a modest recovery subsequently, with 11.076

vehicles registered in 2013 (Figure 9).

Source: SIMI, statistics available on the Societys used car website BeepBeep.ie

Heavy Commercial Vehicles (HCV) registrations peaked at 5,859 in 2006. They fell

all the way to 1,020 by 2010. There has been a modest improvement subsequently,

with 1,554 vehicles registered in 2013.

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Economic and Financial Contribution of the Motor Industry

in Ireland

It is often asserted that Ireland does not have a motor industry based on thepremise that cars or other vehicles are not manufactured in the country. The reality

however, is that the motor sector in Ireland makes a very strong contribution to the

economy through the employment that is created in sales and servicing, and the

contribution to the Exchequer through taxes on employment, but also through the

VAT and VRT payable on vehicle sales. In addition, the motor industry is spread

geographically around the country and makes a very strong contribution to

economic activity in the regions, including small towns and many villages. In an

economy where economic activity is becoming increasingly concentrated in the

large urban areas, the motor industry is one of the few sectors that has a strongregional spread.

EmploymentEmployment in the motor trade stood at 37,400 in the final quarter of 2013. This is

12,100 down on the peak employment level of 49,500 in the final quarter of 2007.

However, between the peak in the final quarter of 2007 and the final quarter of 2009,

employment in the sector declined by 14,300 or 29 per cent. It recovered modestly

in 2010 on the back of the boost to sales emanating from the scrappage scheme.

The good news is that employment levels stabilised in 2013 and are starting to

show some modest growth. It is estimated that for every extra 1,000 new car sales,

130 additional employees are hired in the industry.

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Source: CSO


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Exchequer ContributionThe motor industry makes a very strong contribution to the Exchequer finances

both through taxes on employment and the VRT and VAT payable on car sales.

Table 1 shows the VAT and VRT contribution from new car sales. The total tax take

peaked at almost %1.8 billion in 2007 and then declined by almost 80 per cent by

2009. It has subsequently recovered and by 2013 was almost 66 per cent o&the

lows of 2009.

Source: Revenue Commissioners & SIMI

Table 2 shows the tax contribution from used car imports.


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In total, in 2013 new and used car sales contributed a total of almost %763 million to

the Exchequer. These figures clearly show the potential that a normal car market

can make to the Exchequer.

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The first quarter of 2014

New and Used Car Sales

The first quarter of 2014 saw a strong recovery in vehicle sales, reflecting ongoing

improvements in consumer and business confidence.

Figures from the CSO show a strong recovery in all categories of new vehicles

licensed during the first quarter.

The number of new private cars licensed for the first time reached 39,366,

which represented an increase of 27 per cent on the first quarter of 2013;

New goods vehicles increased by 50.9 per cent;

New tractors increased by 28.6 per cent; and

Total new vehicles licensed increased by 29.2 per cent.

Source: CSO

" Used imported vehicles licensed for the first time also showed strong growth

during the first quarter.

" Used private cars increased by 27.2 per cent and accounted for 25 per cent of

total private cars licensed during the first quarter.

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Source: CSO

Figures from the SIMI show that new car registrations in the first quarter showed

annual growth of 26.6 per cent, with strong growth experienced in every month.A

copy of the ACEA report for all European countries is contained in the appendix to

put this into a European context.

This more buoyant car market reflects improved consumer confidence;the

improving labour market; positive growth in disposable incomes; a general belief

that the economy has turned the corner, and that the bulk of the painful fiscal

adjustment is now almost complete.


Motor dealers report that during the first quarter of 2014, the number of Enquiries in

the show room was 37 per cent higher than the first quarter of 2013 and the number

of Orders increased by 62 per cent. 126

Source: CarsNow1


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Figure 12 shows the changing nature of the environmental factors in the auto

industry. Average C02 emissions from newly registered cars have been declining

steadily since 2008. Average emissions in 2013 were almost 24 per cent lower thanin 2008. This trend towards environmentally friendlier cars has continued in the first

quarter of this year, with average emissions 4.8 per cent lower than a year earlier.

(

Table 6 provides a breakdown of new car registrations by county in the first quarter

of 2014. Every county has experienced a strong rebound in new car registrations,

ranging from Leitrim with the strongest growth of 57.6 per cent to Dublin with the

lowest growth rate of 16.6 per cent. However, Dublin accounted for 36.4 per cent of

the national market in the first quarter.

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#$%&'() #*+*, -./0-0'- /1/23/43( $5 .6( #$'2(.78- %-(9 '/& :(4-2.( ;((


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Tax Receipts Q1 2014The stronger growth in new car registration during the first quarter of 2014 has

resulted in a much stronger contribution to the Exchequer finances. The VRT take is

up by 25.3 per cent, the VAT take is up by 30.4 per cent and the total tax take is up

by 27.7 per cent.


Table 8 shows the tax take from used car registrations during the first quarter. The

VRT take was up by 24.4 per cent, the VAT take was up by 23.6%, and the total tax

take was up by 24.3 per cent.


$n total in the first quarter, the Exchequer collected %453.7 million from new and

used car sales. This was 27.3 per cent higher than the first quarter of 2013.It

accounted for almost 5 per cent of total tax revenues collected in the first quarter. In

addition to this, Road Tax receipts stood at %316.2 million compared to %282.3

million last year, an increase of 12%.

Motor DealershipsIn the first quarter of 2014 there were 94 new companies formed in the motor

industry and 70 were dissolved.

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EmploymentO#cial data are not yet available for employment in the motor industry in the first

quarter of 2014. However, based on sales data, it is expected that there will be

further growth in jobs in the sector. During the first quarter, the motor trade had 247

apprenticeships. This is 6.9 per cent up on the first quarter of 2013 and 40.3 percent higher than the first quarter of 2012.

Cost of MotoringFigure 12, 13 and 14 show the trends in some of the key costs of motoring. In the

year to March 2014:

" Petrol prices were 5.3 per cent lower than March 2013;

" Diesel prices were 4.7 per cent lower than March 2013;

" Motor taxation costs were unchanged;

" Motor Insurance costs were 4.4 per cent higher than March 2013; and

" The average price of a new car was 2.7 per cent lower than March 2013

Source: CSO, Consumer Price Index

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Petrol Diesel


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31

Motor car insurance Motor tax


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Market Issues

New car sales fell sharply in line with the sharp deterioration in domestic economic

conditions since 2007. This has had a very negative impact on the overall economy,

in terms of employment, tax revenues, and regional economic activity.

The market is now improving strongly, reflecting the generally improved level of

confidence in the overall economy. There are key challenges ahead for the overall

economy and for the motor industry. Average personal disposable incomes are

starting to improve, but discretionary incomes are still under pressure from issues

such as property tax, health insurance costs and water charges.

Despite the improvement in car sales during the first quarter of this year, the

industry is still under pressure and is coming back o&a very low base and a number

of very di#cult years. Sales sales this year look setare not likely to hit 90exceed

85,000. From the perspective of the motor industry and the safety and age of the

car stock, the minimum optimal level of sales required to maintain the current dealer

network is around 100,000 per annum.

It is important to recognise the contribution that a stronger auto market would make

to the economy. For every increase of 10,000 in car sales, an extra %82 million

would accrue to the Exchequer. In terms of employment, it is estimated that every

1,000 cars sold supports 130 jobs in the industry, so 10,000 extra sales would

support an extra 1,300 jobs. In the context of Irelands current unemployment crisis,this would be a significant level of additional employment in the economy.

As new car sales fell o&, imported used cars became an increasingly important part

of the market, and the existing stock of cars is getting older. This trend has

significant implications for the motor distribution model in Ireland as new car sales

have reached a level where continued presence on the ground in Ireland is not

economically viable, with consequent implications for employment; it is costing the

Exchequer because the tax take from imported cars is significantly lower than the

tax take from new car sales; there are issues concerning the VAT treatment of

imported cars, with possible financial losses for the Exchequer; the cars being

imported are older and quality issues may arise with implications for road safety and

environmental standards.

As the average age of the existing car stock gets older, it becomes increasingly

di#cult for car owners to re-enter the new car market. This will have two results

the average age of the existing car stock will increase, and imports will become an

increasing and permanent part of the car market.

New Zealand is an example of a market where this has happened. Imports

permanently account for around 60 per cent of the overall car market. This would

32


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not be a positive development in Ireland as it would pose considerable road safety

issues and would also represent a significant loss of revenue to the Exchequer.

Table 9 provides a breakdown of the age of the private cars on the road at the end

of 2013. Of the total cars on the road, 77.8 per cent are five years or older, with only

22.2 per cent registered in the past five years. This is a worrying statistic because

the older the car stock, the issues around safety and environmental standards

become more significant. Furthermore, the older the stock, the more di#cult it is for

an owner to trade up to a new car or a young second-hand car.

Source: Department of Transport

33


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The introduction of the split number plates in 2013 is generally believed to have had

a positive impact on the car market, but it is still too early to gauge the longer term

lasting impact.

Figure 16 shows the trend in car sales in 2012, 2013 and the first quarter of 2014.

The seasonal patterns are always similar regardless of market condition as the

year progresses, sales gradually taper o&. In 2013, this trend was evident up to

June there was a spike in July and August, and then sales tapered o&again. There

is a fear in the market that sales in the second quarter will weaken as potential

purchasers put o&buying a new car until the new plates (142) are introduced.

However, the split plates have spread activity %&'()*+, '&-( (.(/01 &.(- ,*( 1(+- +/2

,*3% 3% 4&&2 5&- ('60&1'(/,! ('60&1'(/,!


All in all, having experienced a dramatic decline in its fortunes, the motor industry is

back in growth mode again and confidence within the industry is currently stronger

than it has been for some time. This is important for national and regional economic

activity, employment and Exchequer receipts.

201220132014

34


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DoneDeal Motor Report Q1 2014

DoneDeal is Irelands largest motoring website and accepts motor advertisements

from both personal sellers and the trade, where it is strongly active through its

partnership with Beepbeep.ie, the SIMI member Used Car Website.

Source: DoneDeal

Figure 17 shows the total volume of classified advertisements for the motor trade by

DoneDeal on a monthly basis since the beginning of 2012. It is broken down into

cars and other motors.

In March 2014, there was a total of 74,194 classified advertisements for the motor

trade published. Cars accounted for 65.2 per cent of the total. 28.4 per cent of totalclassifieds were Trader, with private classifieds accounting for 71.6 per cent of the

total.

In the first quarter of 2014, there were 208,759 motor ads published on the

DoneDeal website. Private ads accounted for 72 per cent of the total, with the trade

accounting for 28 per cent.

CARS MOTOR-EXCL. CARS

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In the year to Q1 2014:

There was an increase of 4 per cent increase in motor ads published on the

website. Ads from traders increased by 12.7 per cent and ads from private

advertisers increased by 0.9 per cent;

There was an increase of 4.7 per cent in total motor ads excluding cars, with

the volume of private ads remaining constant;

There was an increase of 3.6 per cent in all car ads, with an increase of 1.9

per cent in private car ads and a 6.9 per cent increase in trader car ads;

The total volume of sales increased by 14.2 per cent, with trade sales up by

25.5 per cent and private sales up by 9.1 per cent;

Motor sales excluding cars increased by 18.9 per cent, with private sales up

by 10.3 per cent and trade sales up by 86 per cent; and

Car sales increased by 12.4 per cent, with private sales up by 8.5 per cent

and trade sales up by 18.5 per cent.

It is very clear that web-based sales are becoming an increasingly important part of

the second-hand car market, just as web-based sales are becoming an increasingly

important part of many other aspects of the consumer market.

36


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37

!"# %&'(" )*+*& %,-.(+&/0 12 3425A survey of SIMI Members


38/47

New vehicles

38

Q QWhat was the volume of

new vehicle sales in Q1

2014 Vs Q1 2013?

What was the profitability

of new vehicle sales in Q1

2014 Vs Q1 2013?

25% significantly up50% slightly up12% no change8% slightly down7% significantly down



QWhat is the level of interest

for new vehicles (footfall,

prospects, forward orders)

for Q1 2014 Vs Q1 2013?


39/47

Used vehicles

39


used vehicle sales in

Q12014Vs Q12013?


What was the profitability of

used vehicle sales in Q1 2014

Vs 1 2013?

What was the level of interest

for used vehicles (footfall,

prospects, forward orders) for


Q



40/47

Vehicle servicing

40

Q QWhat was the volume ofvehicle servicing in

Q12014Vs Q12013?

What was the profitabilityof vehicle servicing in Q1

2014 Vs Q1 2013?

46% significantly up2% slightly up37% no change13% slightly down

2% significantly down




41/47

Vehicle parts

41

Q QWhat was the volume ofvehicle parts sales in

Q12014Vs Q12013?

What was the profitabilityof vehicle parts in Q1 2014 Vs

1 2013?






42/47

Vehicle body repair

42


vehicle body repairs in Q1

2014 Vs Q1 2013?

What was the profitability

of vehicle body repair work

in Q1 2014 Vs Q1 2013?




43/47

Finance

43

QQ What was the availability

of retail finance in Q1

2014Vs Q12013?

What was the availability of

business finance facilities in

Q1 2014 Vs Q1 2013?




44/47

Employment

44

QWhat were your employee

salary levels in Q1 2014 VQ1 2013?

QWhat was your level of

sta"nginQ12014V

Q12013?


2% increase by 20% or more1% increase of between 10% & 15%

11% increase of between 5% & 10%65% increase less than 5%

14% increase by repaying previous reduction

22% reduced

Q Q

2% significantly increase39% slightly increase

52% no change4% slightly decrease3% significantly decrease

12% significantly di"culty

22% slight di"

culty30% no di"culty32% not ben seeking new employees

Do you intend to increase/

decrease sta"ng levels

during 2014?

Have you had di"culty

finding suitable new sta#for

Q1 2014?


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Apprentices

45

Q Do you intend to take on

any apprentices/trainees

during 2014?

34% yes 111% yes 20% yes 30% yes 45% yes 52% yes more than 5


46/47

Outlook for year ahead

Survey Date 24th March 2014

46

Q QHow positive are you

about the outlook for

improvement/growth in

business during the rest

of 2014 and for 2015?

How positive are you

about the outlook for

business growth and

improved profitability

during 2014 and 2015?

9% very confident67% fairly confident13% neutral11% slightly negative1% very negative

70% fairly positive2% very positive

17% neutral/don't know9% slightly negative1% very negative


47/47

Appendix

simi motor industry review with donedeal

Documents