How many new cars should go on Irish roads every year, assuming a benign economy with continuing low interest rates?
Eddie Murphy, the Ford of Ireland chairman gave us his answer the other day when he was looking back on 2003 and looking further ahead into this year. He thinks the optimum figure is between 160,000 and 170,000.
It's the sort of estimate that will, of course, upset the environmentalists. For the record, 145,000 '03 cars went on our roads: in his words "a healthy result" but not "a bumper yield." The Ford boss in seeking more volume, says the cost bases of dealerships have "ballooned" with tighter margins and intensified competition.
It's an argument that is certainly sustainable. In the last four or five years a huge number of major dealerships in the Republic have been refurbished and the process is ongoing, usually to meet the corporate style and standards of particular manufacturers. Total expenditure could be nudging €€1 billion.
The spending spree started more or less when Irish new car sales peaked at a record 230,000, just over three years ago. There has been a downward volume since and registrations for this month are continuing the trend. (The January '04 figures to date suggest a total market coming in at 133,000, too pessimistic for most analysts.)
It seems, then, that the glistening steel and glass palaces that are the mark of the thoroughly modern Irish retail dealership, aren't pulling in enough new buyers.
Here on the Irish retail market, there's a lot less in the way of cash discounts and cut-rate financing compared with the United States. Significantly, however, attractive deals are being pushed by the traditional Big Three American auto makers, General Motors, Ford and Chrysler, but not the Japanese. The Japanese manufacturers take a different pricing approach that seems to be working. They maintain sticker prices and pack cars with alluring new features.
When Toyota presented its Sienna MPV on the US market last year, it faced tough competition as US rivals were offering consumer discounts of thousands of dollars on competing models. Toyota didn't budge on price, responding instead with a more powerful engine and a bevy of standard features such as keyless entry, power mirrors and tinted glass.
The word from the recent Detroit auto show was that new customers are lining up to pay full price for the Sienna which starts at about $28,000. In November Toyota sold twice as many Siennas as in November 2002.
The Big Three offers on average totalled $3,445 per vehicle in October compared to an average of just $931 for the Japanese brands. In spite of these deals, the domestic manufacturers saw their market share slip 1.7 per cent to 60.1 per cent for the first 10 months of 2003, while Japanese brands grew 1.4 per cent to 29 per cent.
In the US, the industry's frenetic efforts to sustain sales volumes during the recession have led to a financial hangover of epic proportions for many consumers. Those who signed up for discounted, long-term loans now owe more than the vehicles are worth. Nationwide, this negative equity is being felt by a massive 30 per cent of car buyers but in some states like California and Texas it is over 40 per cent. In a market of 18 million-plus vehicles every year, it's upsetting the love affair with the car.