Fall in car sales disguised by heavy discounts and pre-registering

The true state of the Irish car market is being disguised by enormous numbers of last-day registrations in the first three months of the year as both dealers and importers scramble to either pre-register cars to themselves in order to keep their sales figures up, or sell large batches of cars at significant discounts to fleet and hire-drive operators.

On the March 30th, 2,692 new cars were registered, and that in a month when only on three other days did sales climb above the 1,000 mark, with one of those (the 29th) above 1,500 registrations.

One motor industry executive told The Irish Times that "the first 20 days of the month are retail sales, and the rest is all pre-registering or hire-drive sales." It is generally taken that last-day or close-to-last-day registrations are mostly taken up with dealers and car makers registering cars to themselves, or doing bulk deals.

The numbers are disguising significant falls in sales of new cars. According to the Society of the Irish Motor Industry (SIMI), which represents dealers and importers, sales figures were down 7.49 per cent in March, and 8.28 per cent for the year to date. Strip out the last-day registrations though, and the figures are significantly worse. Of the total of 71,405 new cars registered so far this year, 11,723 have been last-day registrations, suggesting the underlying retail market is significantly weaker.

Skewed market

"Pre-reging of cars at month end is not a practice that Ford as a brand engages in," said Ford Ireland chairman Ciarán McMahon. "Overall I think it is a very negative practice that reflects badly on the industry as a whole. It is driven by short-term thinking and can bring problems in the long run when you consider the high numbers of vehicles that are sitting idle for significant numbers of weeks or months after registration.

“It would really be better for the industry as a whole if manufacturers allowed real market demand to determine the level of new car registrations, rather than any desire for short-term market prominence.”

Motorcheck.ie managing director Michael Rochford said: "The industry is coming off three years of sustained annual growth with 30 per cent year-on-year increases becoming commonplace. This was never going to be sustained into the future and it was felt that this year would see a levelling off in sales.

“The dip in sales is largely down to uncertainty in the economy caused by Brexit, whilst the strength of the euro against sterling has made it very attractive to import used vehicles from the UK and consequently many people are opting for a nearly-new import rather than a brand-new vehicle.”

Indeed, those imported figures have risen by as much 56 per cent so far this year, with 24,000 used cars being imported from the UK. The simple reason is that UK dealers are often able to offer much better value than home-grown outlets, with the potential for as much as €2,000 to €3,000 savings on a conventional family car, and as much as €5,000 off a more pricey executive model.

Cheap imports

Do Irish dealers need to start sharpening up their value offering to compete with cheap imports? McMahon is sanguine for now, even though the most-imported car so far this year is the Ford Focus: “I think it is very flattering to see that Irish motorists love Focus so much that it is the number-one imported model from the UK. I think what those figures show is that, for sure, Focus is still a strong favourite on the Irish market as a new car. Equally, it shows that the high number of second-hand Focus models imported into the country is not having a detrimental effect on sales of new Focus here.

“When you drill down into the figures of all those UK Focus models coming into Ireland, you see that the vast majority, more than 75 per cent, are more than three years old. So in effect, those UK imports are making up for the dearth of good second-hand four- or five-year-old Focus models on the Irish market which is as a result of the huge fall in sales across our total market during those downturn years after 2009.”

Which sounds like a positive spin on things, but when even SIMI director-general Alan Nolan is explicitly mentioning the importance of bulk sales to the hire-drive market, one suspects that the motor trade is starting to see the depth of the problem.

“We have previously indicated that the extent of the apparent fall in registrations over recent weeks was at least in part a question of timing, as in 2016 Easter had fallen in March with the result that the seasonal registration of hire-drive fleets was always going to be later this year,” he said in a statement. “With these starting to come through in the last few days of the month we have seen the figures start to improve, but clearly the trend is indicating a reduction on last year’s market.”

How big a reduction is yet hard to see. Significant new models, such as the new Ford Fiesta, Peugeot's new 3008 and the updated VW Golf, are not yet filling up the sales charts and it could be that some buyers are holding back a little, as they know new metal is coming down the line.

March and the year’s first quarter being done with now, there will be a lull between now and July 1st and the beginning of the 172 registration period. If sales, and especially those underlying retail sales, are not significantly better by then, the motor trade could well be facing a new, Brexit-driven, crisis.