The sharp decline in Ireland’s 2017 new-car sales, which fell an EU-worst 10 percent to 131,335 units, was due to a number of Brexit-related factors, experts said, adding that the trend is expected to continue.
"Brexit has reduced second-hand values here by about 15 percent, pushing up the cost of changing a vehicle and impacting new-car sales," Brian Cooke, deputy director general of the Society of the Irish Motor Industry (SIMI), told Automotive News Europe.
This has happened because residual values of Irish cars are now referenced to the UK, where the value of the pound versus the euro (Ireland’s currency) has taken a big hit since Britain voted to exit the European Union. The pound’s decline has led to a surge in used car imports into Ireland. Most of these cars are coming from Northern Ireland and mainland UK. Sales of used car imports rose by 30 percent to 93,454 units last year. A third of these cars were less than 4 years old.
Cooke pointed out that while new-cars sales are suffering the key players in the market continue to succeed. "Franchise dealers are making money on used imports," he said.
The lure for consumers is that a 25,000-pound car in the UK cost 32,750 euros in Ireland prior to the Brexit vote but 27,000 euros, a month after the June 2016 referendum.
The pound fell to a low of 1.08 against the euro two months after the vote but by the end of January this year it was trading around 1.14.
Experts forecast another strong year for imported used cars. "We expect there will be a further increase in imports of nearly new used cars this year and a further drop in new-car sales as a result," Cooke said. "You could see more than 100,000 used car imports if the pound stays where it is."
Irish economist Jim Power agreed: "In normal circumstances, [Ireland's] positive economic backdrop would be expected to deliver growth of up to 20 percent in the new-car market in 2018,” he said. “However, the distortionary impact of the pound’s weakness and the associated surge in used imports from the UK will in all likelihood more than offset the positive economics."
Consumer backlash against diesel has also been more marked in the UK than Ireland, giving franchise operators an incentive to switch vehicles between the two markets. Four out of five used car imports into Ireland last year (78 percent) were diesel powered.
Irish new-car sales fell further in January – a month that usually accounts for more than 25 percent of full year sales. Registrations decreased by 4.8 percent compared with the first month of last year to 37,125 units. Used car imports, however, increased by 20 percent to 9,061 cars.
About 12 percent of January's new-car registrations were made on the last day of the month, something widely regarded as an indicator of presale registrations by national distributors and dealers.
This is done either to meet sales targets or in advance of sales of registered vehicles as "ex-demo" at discounted prices.
Based on the latest sales data, the SIMI forecasts that Irish new-car sales will fall a further 10 percent to 118,220 in 2018 and imports of used cars will rise 20 percent to 114,950.