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Are the discounts going to end?

We have seen significant reductions in prices by the automobile companies over the last 12 months in response to the global economic crisis - do you think we have seen the last of these price reductions or do you think there is more to come?

Filed under scrappage - Asked by Paul Russell (Tullyallen) - Wed, 05 May 2010 08:13


Answer

Hi Paul,

That is a very interesting question. You only have to look at the difference in pricing through various different genre of automobiles to see that we have not had automobiles as cheap here in Ireland in years and even when you compare them to prices in Europe things are favourable. This is of course little solace to those who find obtaining credit virtually impossible.

Manufacturers are constantly streamlining methods of production and there is much greater co-operation between manufacturers in terms of powertrain sharing and platform sharing, but the simple explanation of the reduction in prices here in Ireland is of course the easing of taxation slightly. New automobiles, as I am sure you are aware, are now taxed according to their CO2 emissions and this means that automobiles that might once have been subjected to 30 percent VRT under the old system are now only subject to 16 percent, because of advances in engine technology. When you look at automobiles like the Mercedes-Benz E-Class and BMW 5 Series now with emissions of less than 140g/km, as long as the present taxation system is in place, prices will remain quite low. Manufacturers are also likely to keep prices low to their retailers as every incentive needs to remain in place to keep sales moving throughout a sluggish global economy.

In answering your question, I would say that the lowering of prices certainly hasn't finished, especially here in Ireland. This year there has been a lot of discounting from manufacturers such as Renault who is aggressively targeting market share. Even when scrappage ends in December I can't see an end to this straight away, as next year, without the scrappage incentives, manufacturers and retailers will need to come up with a whole new set of incentives to draw nervous buyers back into the showrooms.

Answered by: changagoidem Adviser

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