Car Sales and the Economic Recovery

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Posted by Michael Rochford on 22 October 2014 in Featured, New Cars

What have car sales and the economic recovery got in common?

Is the two-tier economy a myth? New car sales stats certainly seem to suggest that the economic recovery is not restricted to the greater Dublin area

 

An analysis of new car sales by county released by car history experts, Motorcheck.ie, today shows that Dublin, and its surrounding counties, are not out-performing the so called economically disadvantaged areas. Quite the opposite in fact as Dublin is the worst performing county in Ireland when looking at the year-on-year increase in new car sales for all counties.

Of course in absolute volume terms, the home county of the nation’s capital remains on top – with a population now stretching beyond the one-million mark it would be hard for it to be otherwise.

Things get a little more interesting though when you leave the simple sales figures totals behind and venture into the world of percentages. At that point, you can ignore the population base (to an extent) and see which counties are punching above their weight in terms of percentage increase in new car sales. Is it possible that, at long last, the economies of the outlying cities and counties are actually starting to compete with the capital? Since new car sales are often referred to as a good barometer of economic activity, let’s have a look at the figures…

Lies, Damn Lies and Statistics

county-breakdown-tableOverall this year, to the end of September 90,603 new cars have been registered nationwide, which represents a 27% increase on the same period in 2013. Dublin, however, is actually well below the national average registering only a 20% rise in new car sales for the period.

If it’s the outright champion of all-Ireland car sales increases you’re looking for, you actually need to look at Cavan, where a climb in sales from 649 cars registered up to September 2013 to 979 cars registered for the same period in 2014 puts it at a 51% increase, almost double the national average.

Behind Cavan we find both Clare and Leitrim, which saw a 47% climb followed by Carlow and Monaghan which each posted a 40% increase in new car sales. A full breakdown by county, province and economic region is available in the table below.

Having seen to a lot of economic commentary refer to a Dublin centric economic recovery we were surprised to find that the new car sales statistics to the end of September 2014 seem to indicate that the economic recovery is touching all parts of the country, with the greatest increases in sales coming from some unexpected places.

Economic Opinion

So by and large, it’s all looking good for those beyond the pale. Is Dublin’s dominance really starting to slip? Well, the problem here is that there are as many opinions as the figures will allow. For instance, Micheál Collins is an economist and a senior researcher with the Nevin Economic Research Institute and he told us that the facts behind the figures not only shift the power base well and truly back to Dublin, but they also remind us that not all the weeds of recession have yet been eradicated.

“We have noted the different pace of recovery across the regions. The job growth figures are most telling and they show job increase on the east coast and some losses, still, on the west coast. That in and of itself is an indicator of a much slower recovery outside Dublin, if any at all. The recovery in employment has not been geographically uniform.” So that’s a vote for the theory that the regional economies are buying more cars now because they’re recovering from a lower base.

Sean Barret of Trinity College though, thinks that there are other underlying reasons which might help to explain the disparity in car sales – the lack of public transport, and lower disposable incomes in the Dublin region. “Car ownership per head of population is higher outside Dublin. In some areas outside Dublin it may not be possible to move around at all if one had to rely on public transport. The car is required in areas of low population density.

“There are other possibilities: How about house prices in Dublin are rising so fast that the Dubs have to drive around in old bangers?  Or maybe farmers with their own wells use are water tax savings to buy bigger cars?”

Mr Barret is being tongue-in-cheek but his observations raise a larger truth – we are sometimes too quick to jump upon car sales as a perfect economic indicator. It is tempting to; after all, a car is usually the second most expensive thing we buy, so a growth in sales would seem a safe indicator of overall economic growth in a region.

However, it’s dangerous to be simplistic at this point, to assume that the one leads to the other. Car sales are dependent on a great many other factors slipping into place, on top of which, there is always the looming danger of another economic dip – perhaps one not so large as before, but enough to cause serious problems for the motor industry. We have now recovered to about 60% of average car sales in pre-recession years but recovery is still very fragile, being dependent on both consumer confidence and levels of disposable income.

county-breakdown

Is the answer is in the Clouds?

There is another, fainter possibility, but it’s one that should greatly concern the Irish motor industry. In such urban areas as Paris, London and even Munich, recent figures have shown that car ownership is plummeting by as much as 14% – especially amongst influential 18-34-year-olds. Frustrated by commuting times and the sheer expense of owning a car, they’re shunning four wheels in favour of electrons and touch-screens. A huge majority of them say that they would rather give up their car than their phone or computer and already large numbers have voted with their wallets and feet. Writing for Green Car Reports, journalist Stephen Edelstein says that “most European cities have well-developed mass transit systems and car-sharing services, lessening the need for car ownership. On the other hand, urban car owners still have to deal with traffic and a scarcity of parking spaces, which can wear on even the most enthusiastic driver.”

Given that, as Sean Barrett pointed out, Dublin has (slightly) less need of the car than the regional cities and counties, it’s possible that we could be seeing the first flickers of this effect in Ireland. If it continues as it has in the major European population centers then the Irish motor industry could have on its hands a far greater problem than a mere economic downturn.

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