The SIMI (Society of the Irish Motor Industry) has launched its proposal for Budget 2014, ‘Swappage’ - the introduction of a €2,000 reduction in VRT on the purchase of a new car where the trade-in is 6 years old or older.
SIMI estimates that 17,000 cars would be sold through the scheme (based on experience from Scrappage Scheme) On that basis, Swappage would create 2,200 new jobs, generate €129 million for the Exchequer and save 11,500 tonnes of CO2 emissions per year.
Alan Nolan, SIMI Director General says - “Similar to Scrappage but much more beneficial to the Exchequer, Swappage has the potential to deliver an even greater benefit but at no greater risk to tax revenues, the Industry or the State.
If Swappage is introduced next year, it could help new car sales reach 90,000. On top of that, there would be an increase in used car sales and servicing due to the cycle of business generated by the resale of trade-ins and local jobs & businesses in 400 towns across the country would be protected.”
In 2007, €2 billion in tax was generated from the sale of 186,000 new cars. This has fallen by €1.4 billion and this year, less than €600 million will be collected from just 73,000 new cars. Since 2007, 12,800 jobs have been lost. 49,600 used to be employed in the sector but this dropped to 36,800 in the last quarter of this year. In the last 5 years, 150 garages have closed and the industry is at 50% of normal levels. New car sales have been down by 57% for 5 years.
The average car on the road today is 8.7 years old and is getting older. The majority of trade-ins, 61%, are involved in the sale of new cars and 70% are under 5 years old. Therefore, there is a large gap between those who can afford a new car and those who can’t.
Between 1996 and 2008, the average car dealer in Ireland sold 300 new and 400 used cars a year. Between 2009 and this year, the average dealer sold just 150 new and 150 used cars. With no improvement, 250 businesses could potentially close and 5,000 jobs could be lost. Added to that, small towns are likely to lose their local dealer following bank, post office and Garda Station closures.
Paul Linders, SIMI President & Dealer Principal Linders of Chapelizod & Linders Renault Finglas said -“For 5 years now the Motor Industry has been operating at half of normal sustainable levels. The Motor Industry is facing a fundamental structural problem, where traditional new car buyers are left out of the market due to the cost to change gap. We need action now and if no incentive is introduced, we’ll see many more dealers go out of businesses and the local employment they provide will be gone”.
Swappage would cost the State nothing, new jobs would be created, the Exchequer would gain significant extra revenue and we have a chance of returning to more normal levels of business when consumer confidence and normal economic growth levels return.”
Swappage would not take resources from any other projects and would be at least, self-financing and at no cost to the Exchequer. It would deliver an immediate and significant increase in tax revenues.
If there is no incentive in 2014, revenues will not return to previous levels and new car sales will not reach levels close to 100,000 for years. Car sales at 70,000 mean tax revenues of €590 million and no increase in jobs for years. Almost all buyers have their old car to trade-in but many have not changed their car since 2007 or earlier and the cost to change for a 7/8 year old car is just not achievable for a consumer. Even a return of consumer confidence and increased domestic spending is not likely to result in significantly increased new car sales, as the cost to change will remain prohibitive for most buyers. Motor Industry employment and tax revenues from new car sales are unlikely to return to reasonable levels anytime soon without some support measure.
Scrappage provided a once-off & welcome boost to new car sales and to State Tax revenues but there were no trade-ins & owners who don’t normally change their cars regularly, so Scrappage had little ongoing impact on new car sales in future years. Swappage is focused on trade-ins, with extra employment opportunities & on car buyers who are more likely to re-enter a more normal new car change cycle.