A 25 per cent cut in Vehicle Registration Tax (VRT) in the upcoming Budget and a change to the current registration system are two key recommendations by economist Peter Bacon in his review of the Irish motor industry. Commissioned by several Irish dealers, the report also calls for a VRT rebate scheme on used cars exported from the State.
The report, seen by The Irish Timesand due for release next month, proposes a new two-year scrappage scheme on all cars over nine years or older. It suggests a €2,000 rebate on new cars with emissions of less than 140g/km, when old cars that qualify for the scheme are traded in. The scheme would be co-financed by the industry and Government, which would provide €1,250 of the incentive for each scrapped car. It estimates a potential cost of €100 million to taxpayers based on it being limited to 80,000 cars.
Bacon estimates a recovery in the industry to 2007 figures could take until 2013. The report records the growing influence of manufacturers in the distribution and dealer network in Ireland, and points to an over-supply of dealerships servicing the Irish market. It estimates there are 1,600 businesses in Ireland that could be included in the sector. Of these, half are involved in retail. As the scale of the Irish market is less than the Manchester area, it says “the sector is very fragmented, with a very large number of relatively small businesses”.
“Even in the peak sales year of 180,000 new cars in 2007, there was an average of one new car sold per trading day per franchise dealer. This has fallen to about one every three days,” it states. The report concludes that consolidation is likely.
In terms of VRT, the report recommends a target be set that it be eliminated within 10 years, replaced with a usage tax. The change should be revenue-neutral for Government. It proposes an initial 25 per cent cut in VRT, after which the Government could introduce a five-year plan to eliminate the tax once the market has stabilised.
It also recommends a VRT off-set scheme be introduced, where a tax credit is issued to the value of the residual VRT on a car exported to the UK or another EU country, making Irish used cars competitive in the UK market.
In terms of future strategies, the report calls for a great managerial professionalism within the industry, better customer focus and that manufacturers and dealers create long-term structures that will ensure more reliable flow of finance.