EU cuts cost of cars but prices rise in Ireland

NEW EU regulations on the sale of cars, which came into effect yesterday, are expected to increase prices even further in Ireland but reduce them in most other countries.

Changes to the Block Exemption agreement are aimed at breaking the manufacturers’ control over franchised one-brand dealers and at greater competition, with garages being able to sell multiple makes.

The regulations are also aimed at harmonising pre-tax prices across the EU. While motoring bodies say this will see prices fall in many low tax markets, in Ireland they will probably increase.

Because of the high level of VRT on cars here, manufacturers have been subsidising the wholesale cost to try to keep prices for motorists low.

But if pre-tax prices are harmonised, Irish prices will be considerably higher once tax is added.

Industry analysts say Ireland is set for a price hike in the next year and a half.

Coupled with normal model change price increases of about 1.5%, by the end of 2005 car prices here could have jumped by one fifth.

The Society of the Irish Motor Industry has called for measures in the budget to halt the decline in the new car market, a drop that has been evident over the past three years.

Chief executive Cyril McHugh has called for a cut of 2.5% in the rate of VRT and the reintroduction of a scrappage scheme.

SIMI figures for September show new car sales of 5,954, down nearly 7% on the same month last year. The figure for the first eight months of 2003 was 137,809, down 6.4%.

Average retail prices for new cars in Ireland rose by 7.8% over the 12 months to last June, according to European Index figures, and 5% in most other European countries.

The rules introduced yesterday are aimed at increasing competition and to force the introduction by manufacturers of a single pre-tax price across all 15 member states.