Background & Proposal

Tax Revenues have fallen by €1.4 billion

2007: 186,000 New Cars contributed €1.4 billion in VRT & €600 Million in VAT

2013: 68,000 New Cars will contribute €304 Million in VRT & €255 Million in VAT

12,800 jobs lost, 150 garages closed

2007: 600 Franchise Dealers. 49,600 people employed

2013: 450 Franchise Dealers. 36,800 people employed

Average car on the road now 8.7 years

2007: 1,882,901 cars on the Road. Average age 6.7 years

2011: 1,887,810 cars on the Road. Average age 8.7 years (est.)

Environmental & Safety Implications

Average Age of Trade-in

2013: trade-ins involved in 61% of new car sales

70% of trade-ins under 5 years old

A Swappage incentive can target older cars

Industry at 50% of normal levels for 5 years

  • 1996 to 2008 : New Car Sales averaged 162,000
  • 2009 to 2013: New Car Sales averaged 77,000
  • 2009 to 2013 averaged 70,000 with Scrappage Sales removed
  • New car sales down 57% for 5 years now
  • Current levels of new car sales cannot sustain either the present Distributor structure or current Dealership Networks
  • Real danger that distribution will shift to UK-based Regional Offices reducing employment & spending in Ireland
  • Real danger that dealer networks will face huge reductions in employment
  • 1996 to 2008: Average dealer sold 300 new and 400 Used cars
  • 2009 to 2013: Average Dealer sold 150 new and 150 Used cars
  • Potential reduction of 250 businesses & loss of 5,000 jobs if no significant improvement
  • Motor Industry now the leading sector for Apprentices
  • Small towns likely to lose their local dealer following Bank, Post Office & Garda Station closures

New Car Market is Distressed

  • 2013: of the 68,000 new cars sold, 8,000 will have been ‘strategic’ or ‘distress’ registrations (for which there is no buyer at time of registration)
  • Of the 60,000 remaining approx. 12,000 are Hire-drive cars
  • Of the remaining 48,000 some 30,000 are Fleet/Business cars
  • Retail sales at rock bottom: virtually no spending on new cars
  • Used Imports to exceed 45,000: double the number of new cars bought by consumers
  • 2007: 850,000 cars were 5 years old or less, with 20% replacement rate - 170,000 new sales are possible.
  • 2013: 380,000 cars are 5 years old or younger and at same 20% replacement rate - only 76,000 new car sales are possible

Ireland as a Used Car Market

  • Imports are a normal part of business, not a negative, unless the volume impacts negatively on market & Exchequer tax take
  • eg New Zealand: registered more used imports than new cars for over 20 years
  • 2013: Used imports double the level of new car sales to consumers
  • Ireland is becoming a used car market - up 23% while new car sales are down 16%
  • Used exports to Ireland provide solution for another Member State by removing potential End of Life Vehicles

Swappage – priming the sales cycle to increase Tax Take & Create Jobs

  • 2007: Government tax take €2 billion from 186,000 new car sales
  • 2013: Government tax take €559 Million from 68,000 New Car Sales
  • Exchequer needs increased tax take & increased employment
  • A Swappage incentive would not take resources from other projects, being at least self-financing & at no Exchequer cost
  • It will deliver an immediate & significant increase in tax revenues
  • Without an incentive, revenues will not return to previous levels for years
  • Without incentive, new car sales will not reach levels close to 100,000 for years
  • Car sales at 70,000 means tax revenues of €500 Million & no increase in jobs for years
  • Swappage incentive can deliver an immediate increase in sales initiating a stepped-return to more normal levels of VRT/VAT & employment
  • At 120,000 new cars: an extra €427 Million in tax and 7,000 extra jobs
  • At 140,000 new cars: an extra €592 Million in tax and 10,000 extra jobs
  • Introduction of Swappage in 2014 could deliver new car sales of 90,000
  • Even reducing tax take by €26 million in deadweight on the initial 70,000 and by €34 million incentive on the additional 17,000 incentivised sales, this will still deliver an additional €80 million (after refunds) in tax & an additional 2,600 jobs, saving another €50 million

There is No Potential for Early Recovery in Tax Revenues

  • New car sales are dependent on an acceptable ‘cost to change’
  • Almost all buyers have their old car to trade-in but many have not changed their car since 2007 or earlier & the cost to change for a 7/8 yr old car is just not achievable for a consumer
  • Only option is to seek a younger used car but because so few new cars were sold in the last 5 years, this means replacing a new purchase with used imported car
  • Even a return of consumer confidence & increased domestic spending is not likely to result in significantly increased new car sales, the cost to change will remain prohibitive for most buyers
  • Motor Industry Employment & Tax Revenues from new car sales are unlikely to return to reasonable levels anytime soon without some support measure
  • The average new car contributes €8,218 in taxes:
- VRT - €4,467
- VAT - €3,751
  • The average imported used car contributes €2,878 in taxes:
- VRT - €2,642
- VAT - €236
  • Each imported used car replaced by a new car will deliver an additional €5,340 to the Exchequer

What is Swappage Proposal?

€2,000 reduction in VRT on a new car if trading-in a car 6 years old or over for a limited period

How can Tax Revenues be increased from €500 Million to €1 Billion?

  • Without an incentive such as Swappage to stimulate new car sales, Tax Revenues will not recover for years & both employment & businesses in the sector will remain vulnerable
  • Introduction of Swappage in 2014 would deliver a benefit for the Exchequer

Why Swappage can be even more beneficial than Scrappage

  • 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