2014 car sales increased by 9% last year and are now at a 7-year high. This follows the 10% increase in 2013. Despite this growth new car sales in Northern Ireland in 2014 were still 17% below their 2007 peak and 12% below 2006 levels. Unlike England, Scotland and Wales, Northern Ireland has still not managed to recoup the lost car sales that stemmed from the downturn. This is largely due to the fact that Northern Ireland experienced a bigger decline in new car sales relative to 2007. It is noted that new car sales in the Republic of Ireland increased by 30% last year. However, the volume of new car sales in the South remains just over half of the level recorded in 2007.
Looking ahead, 2015 is expected to be another strong year for new car dealers with sales expected to rise by around 10% year-on-year. 2015 will represent something of a ‘sweet spot’ for new car dealers with the annual rate of consumer price inflation set to fall to around 0.5%. This would represent the lowest annual rate of CPI inflation since records began in 1989. At the same time, above inflation wage rises are increasingly feeding through which, in turn, will boost consumer spending in an abnormally low inflationary environment. In particular, the fall in oil / petrol prices will effectively provide a significant pay rise for many drivers. As the cost of motoring plummets more consumers will be in a position to buy a new car.
A major factor behind the easing in inflationary pressures concerns the recent collapse in the oil price. In sterling terms, the price of a barrel of Brent crude oil has more than halved from £67 per barrel last June to £33 today. Petrol / diesel prices have fallen sharply too and we can expect a fall in the petrol price below £1 per litre in the coming weeks. This compares with over £1.31 back in July last year. This would lower the cost of filling up the tank of an average family car by almost £20 per fill. The more you drive the more you will save!
We should also see a change in the type and brands of cars being purchased in the year ahead. During the cost of living crisis / high petrol prices smaller more fuel efficient cars were more desirable with gas guzzling 4×4’s becoming more scarce. During the downturn the Korean brands (Kia & Hyundai) saw huge gains at the expense of European (notably French & Italian) and Japanese models. Notwithstanding the improvement in the build quality of these brands, one of the main reasons was cost and value for money. In turn, this was significantly influenced by currencies with the weakness of the Korean Won relative to the euro and the Japanese Yen. However, over the last two years there has been a significant weakening of the Japanese currency against the Korean currency unit. It has been a similar story with the Korean Won strengthening considerably against the euro. This will significantly erode the value for money advantage that Korean brands had over their Japanese and European counterparts. Watch out for a rebound in Japanese brands in the year ahead.