Ireland could be heading for a car market collapse in 2020

Are we heading for a major collapse of the car market in Ireland? Certainly that seems to be at the forefront of the best minds in the car industry here right now, and the most dire predictions would see sales fall as low as 55,000 units in 2020 — that’s as bad as the recession-ravaged nadir of 2009.

What would trigger such a collapse?

WLTP — or to give it its full title, the World Light-duty vehicle Testing Procedure.

Right, a quick cog notes guide to WLTP before we go on. WLTP is the new official test that gives you the combined fuel consumption and Co2 emissions figures for your car. When you see those washing-machine-style green-to-red bar graphs next to cars in your local dealership, that’s where the numbers come from.

WLTP replaced the NEDC

WLTP was introduced last year to replace the old, discredited NEDC, or New European Driving Cycle, test. When the diesel scandal broke, one of the major issues that arose from it was that it became clear that NEDC was outmoded and outdated. Car makers had become too used to finding the loopholes in the test, and so the official figures were becoming unrealistically low — there was almost no chance of replicating a car’s claimed fuel economy numbers in the real world.

So WLTP was brought in. It’s a similar test, in principle, to the old one in that it’s carried out in a laboratory on a rolling road, but the test is longer, it includes more realistic driving scenarios, and the opportunities for cheating a much fewer.

That’s all good, right?

The test was introduced because it would give consumers a much more realistic idea of what kind of fuel economy they would be able to get from their new car, so that has to be good, doesn’t it?

Well, yes, but… But the problem is a more realistic fuel economy figure means higher recorded Co2 emissions, and in a country that bases all of its motoring taxes on Co2 that can make things difficult.

We’ve already had a preliminary introduction of WLTP, one that saw a car’s official figures taken as sort of an average between WLTP and the old NEDC, which saw most cars’ Co2 figures increase at least a little. Now, in January, comes the second round of WLTP implementation and this is where it gets serious. No more fudged figures — from January 2020 the full force of WLTP will be felt, and indeed seen in a car’s Co2 numbers.

Revenue neutral measure

Now, when it introduced WLTP, the European Union said that it should be introduced as a ‘revenue neutral’ measure — one that was designed to inform car buyers, not penalise them. To do that, the Irish Government will have to adjust the tax bands it uses for both Vehicle Registration Tax (VRT) and motor tax. If it doesn’t, then many cars — including many of Ireland’s best-sellers — will see their prices increase, dramatically so in some cases.

Indeed, in the case of many popular family-sized SUVs — the best-selling cars on the market right now — we could be talking about a price increase of as much as €4,000 if the tax bands aren’t changed.

The troubling thing is that we have heard, so far, nothing concrete from the Government on what it intends to do, and the clock to both the Budget in October, and WLTP day in January, is running down fast. Car importers are already having to make a best-guess judgement on which models to order for January 2020 from European, Korean, and Japanese factories that need substantial lead times to get cars built, and on boats headed to Dublin, Rosslare, and Cork.

Other considerations

Causing further consternation is the recent announcement of the climate change action plan. While the Government’s ideas to combat climate change are laudable, as are ambitions for us to become an all-electric market by 2030, there’s a problem — no-one in the car industry has been consulted. In other words, the Government is making and announcing plans without first chatting to the people who actually make and supply the cars needed to make this change. Which doesn’t bode well.

Worse yet, the worry now is that the Government may use the implementation of WLTP as a battering ram to try and get people to switch to electric cars, leaving the tax bands unchanged and pushing up the purchase and running costs of buying a petrol or diesel model. The intentions are good, but such a policy would destroy car sales next year. With supply and choice of electric cars still restricted, buyers would face an invidious choice of paying through the nose for a new petrol or diesel, or instead importing an older car from the UK, one which if it was built before September 2018 would be taxed according to the old NEDC figures.

The one silver lining in this cloud is that it might, for a time at least, push up second hand values, as buyers seek to grab the last of the good pre-WLTP cars on the market. That increase would be only temporary, though, as any increase in the number of imports from the UK would dampen the effect.

So what’s to do?

Well, the advice is this — if you’re looking at changing your car in 2020, and you can afford an electric car, get your order in now before demand outstrips supply. If you can’t afford an electric car, or one doesn’t suit your lifestyle, then you’ll have to either consider downgrading to an older car, or just waiting and hoping that the Government wakes up to this potential crisis, and takes action in time.