Fears grow for 10,000 jobs in motor industry

Fears grow for 10,000 jobs in motor industry as prominent multi-franchise dealership EP Mooney announces its closure today. The news comes just weeks after commentators warned there could be 10,000 jobs lost in the motor industry if the government doesn't provide some sort of stimulus to the troubled sector.

Can the Scrappage Scheme Save the Industry?

Indeed there's been a huge amount of controversy recently around the proposed introduction of a government sponsored scrappage scheme. It's no surprise that the principal sake holders in the motor industry are lobbying hard for one. With sales down more than 60% it's clear that the industry is in serious difficulty. With the recent closure of Belgard Motors and today's announcement from EP Mooney it looks like there are still more dealerships on the brink of closing.
Following on from the today's news I thought it might be useful to take a look at the age profile of the 'National Fleet' and try to get an understanding of who might benefit from the scheme if it were introduced. The following figures were taken from the Department of Transport's Irish Bulletin of Vehicle and Driver Statistics for 2008.

Age of Private Cars

Age of Private Cars
Age of Private Cars

The graph above shows us that if we were to introduce a scrappage scheme for vehicles registered on or before the year 2000 we would be inviting approximately 677,938 (35% of the current fleet) car owners to 'scrap' their current car and purchase a new one. But how many of us could afford to make the jump from a nine year old car to a brand new one - even with a scrappage scheme? As we know, it's very difficult to source finance at the moment. A majority of buyers in the present 'credit crunch' are limited to what they can borrow from the credit union which generally speaking wouldn't fund the cost of bridging the proposed nine year gap. Let's take a quick look at the arguments for and against.

Arguments in favour of a scrappage scheme

  • The Irish motor industry has already lost 10,000 jobs (a fall from 45,000 to 35,000). Industry representatives say that current sales statistics if repeated next year will only sustain 25,000 jobs meaning another 10,000 will be lost.
  • A scrappage scheme might only lead to an additional 10,000 new cars being sold but this would in itself be a significant help to an industry already on its knees.
  • A scheme funded by 100 million euro and co-financed by the industry would be revenue neutral with no net cost to the exchequer. The revenue would benefit from bringing sales of new cars forward with an increased VRT take in the sort term.
  • It's the environmentally friendly thing to do! A 10 year old used car car today creates 200 grammes of CO2 per kilometer travelled whereas a cleaner, greener replacement new car would save 70 grammes per kilometer for the rest of its life on the road.

Arguments against a scrappage scheme

  • Some commentators claim that the Irish motor industry like the economy as a whole was operating in a bubble and that it needs to stabilise itself without a stimulus package.
  • Because the manufacturing process of a new car creates more CO2 that the actual running of it, taking older cars of the road and encouraging the manufacture of new ones is not an environmentally positive thing to do.
  • As Ireland doesn't have an indigenous car manufacturing industry, a significant portion of the money spent on the purchase of a new car leaves the country. In times of recession, we should be trying to support truly indigenous industries that will benefit the economy in a multi-layered fashion.
  • The money would be better spent on a 'Car Enhancement' scheme. This scheme would focus on modifying the existing national fleet in an effort to make it more environmentally friendly.

What do you think?
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Tomas Downing - November 27, 2009 at 5:34 pm
We really should try to divert funds into creating employment in Ireland. Importing cars into Ireland is not the answer. In the current climate I'm not sure that anyone would support a scrappage scheme anyway.
Shane Teskey - November 28, 2009 at 2:11 pm
Hi Tomas, thanks for your comment. Maybe if the current government had a plan for getting the 10,000 motor industry people who have already lost their jobs back into employment a scrappage scheme wouldn't be so important?
Ray - December 09, 2009 at 3:55 pm
A Scrappage scheme is a great idea, but will only work when finance comes back into the market, Getting €2,000 euro off a car won't make the slightest bit of difference unless finance can be arranged. It worked well last time at getting the junkers of the road but that was during boom Ireland when everyone could get a loan, this time round I'm not so sure.
Shane Teskey - December 09, 2009 at 7:29 pm
Hi Ray, thanks for your comment. Today's budget announced a €1,500 discount on VRT where a 10 year old (or greater) car is being traded in part exchange. I'll be looking at the options in detail in a later post but my first reaction is that it's a disappointing result for an industry in crisis.
Stephen - January 04, 2010 at 4:06 pm
I think we have to ask the question as to why the industry is in crsis. Personally I believe that it is because dealerships grew too big and came to depend on customers that had access to cheap and easy money/credit. Also, to a degree companies renewing their fleets too often. These customers are now few and far between so it is necessary for car dealers to adjust to the current market and save themselves. Obviously a degree of downsizing is required this is unfortunate to those affected but what more can the Government do for an industry that is providing something that people want more than need.
Shane Teskey - January 04, 2010 at 5:14 pm
Thanks for the comment Stephen. The 'Finance Famine' we're experiencing now is definitely curtailing new car purchases. I'm interested in your comment about the renewal cycle for company fleets. have you come across this professionally? I would have thought that the fleet management companies employed to run a fleet on a companies behalf can assess the whole life running cost on a car and determine when the optimum time is to change (I know that's what they're supposed to be doing). BTW, I've just taken a quick look at the registration stats for 2010. There have been 258 new cars registered year to date as opposed to 2,798 last year. However this comparative days this year are a Friday (new years day) and a Saturday (always quiet for new car registrations) and it may be that buyers are putting off collection of their new car until the ice retreats. As you can imagine we're watching the stats closely this year looking for some early indication as to how the sector will perform.
Stephen - January 04, 2010 at 6:36 pm
Shane, I have seen companies (professionally) that were fueling a lifestyle and in my view managed poorly. These companies did not operate fleet management but merely bought what they liked when they like and at best possibly did a calculation on the finance costs etc. on a piece of tissue paper. These were not large companies but with so many Irish Companies being small family owned opperations they all add up. It is no surpirse that the number of cars registered is down on last year but I think it would be interesting to know if the average price of registered cars is also down. The reason being that in the past few years "prestige" cars on the roads became common place. Another thought, is that price is often simply determined by the rule of "how much will someone pay". I assume the motor industry is no exception and therefore we should expect to see an aggressive price war develop between the dealers so as to maximise the numbers of sales and hope to "kill off" competition.
Shane Teskey - January 04, 2010 at 6:50 pm
Completely agree Stephen. Sales of Range Rover Sports and how they died year on year last year illustrates your point nicely. Whilst it's already a fiercely competitive sector I think we're now starting to see the price war move up a gear and gain momentum as each manufacturer rushes to add value to the government scrappage scheme. Identifying the average list price for cars purchased is an interesting idea. Something I'll keep in mind this year for sure.
Budget 2010 – Scrappage Scheme, Should YOU buy? « Motorblogs.ie - March 04, 2010 at 1:02 pm
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