The Government should take a year to sort out the long-term structure of how we are going to tax cars.
If it doesn’t, the motor industry will be plunged into a crisis, the shock waves of which will undermine not just companies and jobs, but Exchequer income.
Those are just two of several major challenges/threats facing us as an economy and a society, according to highly respected motor industry figure Denis Murphy.
He spoke of his fears about what may be coming down the line following the publication of proposals to revamp car taxation.
Frankly we have heard much of what he has to say in one guise or another. What makes his interview with ‘Motors’ strikingly different is how it stems from years and years of hands-on experience.
This is real, gritty make-or-break business talk; views from the coalface that highlight the deepening crisis in the industry.
Denis is managing director of Volkswagen dealerships Blackwater Motors, Fermoy, Forge Hill (Cork city) and Skibbereen; and Audi Cork and SEAT Fermoy.
His opening remarks to me reflect the gloom and uncertainty.
“It has been one of the most difficult years we’ve had for a long time. After being involved for such a long time you get a sixth sense. It’s all negative.
“The market should be hitting 150,000/160,000 new-car registrations. Instead it’s looking like 120,000 or fewer. “What was registered in July was sold two months ago.
“There is nothing happening. Nothing. People come in and talk about EVs.
We show them an e-Golf for €40,000. Then they look at an internal combustion engine (ICE) option and they ask if it will be banned in a few years.
“So they do nothing. They are doing nothing.”
We have now gone three years with steady decline in the market, Denis says. And a lot of the market is “forced” (pre-regging).
“When volume is there we make money. When it isn’t you make nothing,” he said.
“We’re facing into the most traumatic years we’ve faced for a long time. We don’t have the money to meet them because we haven’t the money to carry us over.”
The big fear is VRT and the proposed changes. “You might say the latest ones are not that bad. But they are coming on the back of really tough times.
“Taxation has taken the retail price of cars outside the potential of the vast majority of people. Most people can’t afford them.”
He calculates that the Government takes an average €10,000 in taxation on every car. “We have 23pc VAT and an average of 19pc VRT. That is 40pc of the total price of a new car.”
With one of the lowest rates of ownership in Europe and a poor public transport system, people are “forced to buy the cheapest cars”, says Denis.
That’s why, even in good years there have been 50,000/60,000 imports – be they Japanese or UK. Used imports replace new cars.
The latest Climate Action Report and Taxation Strategy Group (TSG) say we won’t meet our 2030 emissions targets if we continue as we are.
“The Government wants to get one million battery electric vehicles (BEVs) on the road by 2030. But BEVs are so expensive when you exclude the grants,” says Denis.
“The majority of cars sold cost €25,000 or so. All we’re going to do is collapse new car sales and increase older imports.”
So, Denis says, the tax policy is going to achieve the opposite of what we’re trying to achieve.
Like so many others, he remembers the 2008 Budget changes that switched us to emissions-based taxation. All the money dealers made over the Celtic Tiger years was lost on the reduced price of cars.
“We had nothing to deal with the recession. Now we’re facing a similar situation. We haven’t generated the money we need to carry us over into 2020 and 2021.” Getting people into EVs will be difficult “because they are still going to be way above average price”.
“It is going to take until 2025-2028 before you see EVs priced in the €20,000s. In the meantime how will manufacturers ‘stay alive’ for EVs?’ says Denis.
“By selling cars with internal combustion engines (ICEs).”
So where does this all leave us?
“When you distil all that happened in 2008 and see what is happening now, you’d be saying, ‘Lads take a step back and really reform the VRT for 2000 to 2025 and then from 2025. Make a transition that is gradual and measured not trying to do everything in one fell swoop.'”
Respected economist Jim Power projects a plunge in new car sales next year if the proposed VRT changes go through.
Denis is fearful: “They have done it in the past. So they can do it again.” He is angry: “We’ve been f***ed so many times with VRT we can’t trust them not to do it again.”
So what is he really saying?
“I’m saying please expand the bands to realistic levels and take a year to really reform the VRT system for a sustained period of time. Reverse the changes of last year’s 2018 Budget when prices went up significantly.
“That way we get people into low-emitting ICEs and plug-ins and then you move to electric. The 2008 Budget shows people will follow.”
So he wants the Government to reverse 2018 and 2019 measures and spend a “good year” using the VRT system to buy lower emission cars and make it tough on imports.
He warns: “If they go ahead with a Budget increase in October we (his garages) will move from new car seller to importer.
“It happened before.
” We had to switch. And we’ll do it again.
“If there are not changes, our main priority next year will be becoming a big importer of used cars.”