Sunday 18 March 2018

Let's build confidence and help people's dreams become reality

Volkswagen Group Ireland CEO Simon Elliott says that, with the support of the Government, we must simplify the way we do business and oil the wheels of the car industry

A car is the second-largest purchase most consumers will ever make, second only to a house. So, with such fears around house buying in Ireland, how does the automotive industry fare? How does the industry play a part when people are so cautious about big-ticket items?

People need cars -- that's a fact -- and purchasing a car is often a positive emotional release. It's our job and the job of our dealers to make the experience a pleasurable one, especially today!

But it's not just the car market but the van market that says an awful lot about the economy and business confidence. Generally speaking, car sales in Ireland are for private individuals. Yes, there is a growing fleet sector, a growing leasing and contract hire sector, but generally, it's retail sales today in the main.

However, vans are needed for small, medium and large business use, and if they are

'Is the light at the end of the tunnel an "escape route" or a train speeding towards us?'

changing their vans there is a good chance that the business is doing okay. So I tend not to look at the car sales statistics as my barometer for the economy, but van and commercial vehicle numbers.

So, we identify car and van sales as a important barometer -- and equally an emotional feelgood factor, a talking point, as everyone has their favourites. Cars and sport are probably the most talked about subjects. But is the automotive sector doing its bit to aid Ireland on its road to recovery?

As head of the largest automotive company in Ireland -- responsible for Volkswagen, Audi, Skoda, Seat and Volkswagen Commercial Vehicles, around 24 per cent share of car and 23 per cent of van sales, as well as €50m-worth of spare parts, and together with our brand dealer networks, Volkswagen Bank and our headquarters in Liffey Valley, Dublin, we employ around 1,000 people, excluding the subsidiary companies.

I have been in Ireland for less than a year -- I have a fresh pair of eyes, a fresh vision, maybe a different approach. I am not burdened with the baggage of the Celtic Tiger, something I get fed up of being reminded about. I have no history, no "we always do it like this" attitude: just a desire to play in the market as it is today and do my bit to make it better for the future.

My good friend Brian Laws, the former Scunthorpe, Sheffield Wednesday and Burnley football manager, says: "If you play in Division 2, just go and become the champions, then you can see what it's like in Division 1." How true that is -- you can only play on the field you have.

I guess I have always been an optimist. But in terms of the road to economic recovery, is there hope? Is the light at the end of the tunnel an "escape route" or a train speeding towards us?

In our industry, we are burdened by red tape, protocol, taxation and a Government seeing us only as a cash cow and not an industry where, if its customers are motivated, supported and recognised, the market could grow massively, with a result of more VAT and therefore more revenue for the country. But, VAT, VRT, car tax, and a ridiculous January 1 registration system do nothing to make it easy buying what is probably the most expensive, highest VAT item outside of a house.

There has been a lot of debate around the registration date in Ireland. The UK also used to have one registration change, which happened every year on August 1. Unlike the Irish system, at least Christmas had gone and there was no snow on the ground. In the UK, two million cars are sold (not circa 100,000 like here), so the pressure on cashflow and marketing costs, on stock and people around August was vast. Thankfully, common sense prevailed, and in 1999 the registration plate changed to March and September. This year, for example, in March new cars will be registered 12 and in September they will be registered with a 62 plate.

Looking at the Society of Motor Manufacturers and Traders website, almost every year after 2000 was a record year. "Britain goes crazy for the new reg plate" were headlines in the press. So I would say to the Irish Government, come on, let's get some juice in the tank and get stimulating the car market for everyone's benefit.

Actually it's not even a finance issue. I had the pleasure of meeting Michael Noonan on this matter and I actually think he gets it, but it's not his shout as it's the Minister for the Environment's call.

Then, there is the VRT. Only three countries in Europe have VRT: Holland and Denmark and Ireland. So why do we need this tax? If it wasn't there, more cars would be sold, more VAT taken, more employment created -- another win-win situation -- but there is little hope in that U-turn.

So, what will put Ireland on the road to recovery? The best people to ask are the public; real people, the ones spending, saving and trying to look positively forward: what do they need?

There is little doubt that the automotive industry gives people a release, a dream, so let's try and help those dreams become a reality.

The first obstacle is often finance. It's a challenge going to a bank, so we at VW are glad we've got our own bank -- a bank that lent more than €100m last year and has a 78 per cent acceptance rate. I believe that real high street banks have to be more customer centric. I know it's tough out there, but consumers are wary of even daring to ask the question when it comes to money right now.

Volkswagen Group is successful in Ireland because it has a bank, because it understands that consumers want choice too, a loan, hire purchase, a PCP, leasing, contract hire -- so the good news is, if consumers are only left with a choice of which funding method to choose, it's a positive result!

Customer satisfaction, "loving your clients", treating them as someone special, appreciating their loyalty and not damaging their investment by distressing your brand -- protect it and you will get rewarded. Too many companies have distressed their brands with overt discounting, crazy offers that are not sustainable. Negative equity is not just restricted to house purchases but extends to certain makes of car too, and this doesn't oil the wheels towards the next purchase or build confidence.

In 1952, when Ireland became the first country outside Europe to build the VW Beetle at Ballsbridge, who would have thought that almost one million VWs later we would have the complexity we have today? It's over-complicated, over-stressful and over-burdening, and we need to simplify the way we do business, with the support of the Government, for our sector.

We need two registration peaks in Ireland, not one, to stimulate demand not once but twice a year. In doing so, this takes pressure off stock holding and marketing costs for the manufacturers and dealers alike. We need a root and branch look at the VRT system. In my opinion, it should be scrapped.

And we should investigate a scheme similar to that in the UK for cherished number plates or private number plates, which makes millions of pounds for the UK government every year.

There are green shoots in Ireland; Irish people have had enough of finger pointing, especially as now most other Western European countries are in trouble. What we need is a Government support package looking at stimulation of the automotive sector. Tend carefully to our green shoots and watch them grow, stamp on them and watch them wither and die.

Is the automotive sector doing its bit to aid the recovery in Ireland? Well, it sure is trying very hard in all aspects, but it desperately needs support from Government, otherwise the road to recovery will be more of a bumpy track.

Simon Elliott is Group CEO at Volkswagen Group Ireland

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business