Friday, August 7, 2009

The Irish motor industry is in a bit of of a pickle, …or should I say a stew?

audi logo The overall decline in the registration of new private cars in Ireland is so stark that at times I wonder if I am comparing like with like when observing the trend in new private cars licensed over several years! 

Ireland is not the only Western European country in poor shape.  Car sales throughout Europe, apart from Germany, have declined by over 19% to 4.9 million units.  Overall sales in Spain in 2009 are down 38.3% and overall sales in the UK sunk by 25.9%. 

Germany is the only jewel in the car sector.  Sales there increased this year by 26.1% to 2.1 million vehicles!

Worldwide production of cars is 30% greater than 2009 demand – reflecting the 25% drop in global demand this year.  Audi executives believe that the need to update vehicle technology and models will mean that car makers will not recover pre economic crisis profit levels for the foreseeable future, even if sales volumes recover.

The only ray of optimism in the global car market has been in China where car sales in August 2009 were 90% higher than in August 2008 and are likely to reach 7.3 million vehicles this year.  This trend is spurred by a more broad-based improvement in consumer confidence.


Audi vehicle deliveries worldwide

The Irish downturn can be put into a wider European and world context by comparing the delivery of Audi cars in the first half of 2009 with those during the first half of 2008 as benchmark indicator:

Deliveries to customers Jan – Jun
Jan – Jun 2008 % Change
Germany 113,882 122,404 -7.0%
Australia 5,612 5,103 10.0%
Austria 8,999 8,520 5.6%
Belgium 16,618 18,197 -8.7%
China 66,866 60,509 10.5%
France 24,914 27,993 -11.0%
Holland 7,574 7,893 -4.0%
*Ireland 1,893 3,152 -39.9%
Italy 30,199 30,461 -0.9%
Japan 7,579 7,893 -4.0%
Russia 7,404 8,660 -14.5%
Spain 20,039 30,348 -34.0%
Sweden 6,193 8,196 -24.4%
Switzerland 8,133 8,367 -2.8%
United Kingdom 46,684 57,983 -19.5%
United States 37,845 45,023 -15.9%
Other countries 55,544 65,517 -15.2%
Audi cars worldwide 465,978 516,219 -9.7%















However, I think that an authentic acid test of how the economy is performing is to review spending patterns. If they change dramatically in overall terms, as is the case in Ireland, how are the demographic sub-sets responding? 

Four car brands are especially popular in Ireland among those with some discretionary spending power.  They are Audi, BMW, Mercedes Benz and Volvo

merc These brands, combined accounted for 8.5% of the 150,485 new private cars sold here in 2002.  The new private car market expanded by 2006 to 173,273 vehicles and these four brands increased their combined share to 10.6%.  This year an economic hurricane has mutilated the Irish new car sector.  Total units sales for the Jan-Jun six-months were 42,365 but the interesting nugget is that these four car brands have maintained a 10.4% share of this most depressed market.

The demographic cohort that is more likely to purchase these brands include:

  • Self-employed individuals, including proprietary directors
  • Those receiving dividends or other distributions paid from profits to shareholders of a company resident in Ireland 

New Private Car Registrations during Irish boom




% Change











Mercedes Benz










All private cars





Source: Central Statistics Office

Income Trends of Likely Buyer Cohort

Turning to the presumed customer cohort, the following illustrates their changes in number and income using income distribution statistics provided by the Revenue Commissioners:





% Change

Gross income of self-employed, including proprietary directors




Number of self-employed, including proprietary directors




Dividends and other distributions from profits of companies resident in Ireland




 Source: Revenue Commissioners

Income tax from self-employed individuals declined by 30.5% in 2008.  The recent spending trend by Irish consumers on ‘personal transport and equipment’ is captured by the recently published edition of National Income and Expenditure:

National spending trend
on ‘Personal Transport and Equipment’

  Expenditure on ‘personal transport and equipment’ % Total personal expenditure
2008 €3,738M 3.18%
2007 €4,282M 3.70%
2006 €3,950M 3,74%
2005 €3,565M 3.69%
2004 €3,068M 3.44%
    Source: Central Statistics Office


Impact of downturn on 2009 sales

Units sales for the first six months of 2009 are a symptom of a society overburdened with property related debt – either as a purchaser, developer, renter, speculator, wealth hoarder or, merely, incurable optimist.  Put at its simplest – bankers lent excessively to all facets of the property sector and there is no spending, or borrowing capacity left for anything else. 


Jan-Jun 2009





Mercedes Benz




All private cars



But the 2009 sales of some other high-end brands are also severely pinched:


Jan-Jun 2009

Alfa Romeo




Land Rover









Supporting economic dynamics in Ireland



Dec 2002

Dec 2006

Mar 2009

Non-mortgage household debt








Live Register




‘At work’




 Source: Central Banks and CSO

The number on the Live Register at the end of July 2009 has risen by 31% to 435,735 since last March.  An unemployment rate of 12.2% at the end of July 2009 will not revive any new car sales.


Double-digit downturn worldwide 

bmw The BMW Group sold 338,190 cars in the second quarter of 2009 and 615,454 in the first half of 2009.  This represented an 18.1% decline in the second quarter and 19.5% decline in the first six months.  BMW made a profit of €121 million in the second quarter, a decline of 76.1%.  Group brands include BMW, Mini and Rolls Royce.

volvo Audi sold 570,388 cars (including Lamborghini and certain VW brands) in the first half of 2009 – an 11% drop over 2008.  Rupert Stadler, the Audi chairman remarked that given the degree of instability in the car market, he predicted a decade of major change that will encompass technologies and structures.

Ford have been attempting to sell its Volvo car unit for some time. One of the interested bidders is the Geely Automobile Holdings from Hong Kong.  This company started out in 1986 as a refrigerator manufacturer.  It evolved into the motorcycle business in the mid 1990’s and by 1998 started to make cars – exporting its first vehicle as recently as 2003.

Ageing buyers abandon luxury brands

Aside from the recession, car buyers in major markets are ageing rapidly.  Those aged 60, and over, represent less than 30% of car buyers but research by Credit Suisse suggests that this cohort will account for 40% of the luxury car buying group by 2020.  They prefer smaller, cheaper and easier-to-drive vehicles.  Profit levels on smaller cars are lower than is the case with larger cars.

Also in The Crimson Observer …

May: Irish motorcycle industry holds the road’

June: Irish motor industry in a dramatic nose dive’

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