Saturday 24 August 2019

Nissan boss leading the charge for EVs

Irish chief James McCarthy has faced surging imports, a mini 'existential' crisis and the flat Earth society, writes Michael Cogley

James McCarthy, chief executive of Nissan Ireland. Photo:
Steve Humphreys
James McCarthy, chief executive of Nissan Ireland. Photo: Steve Humphreys

Michael Cogley

In the winter of 2012, James McCarthy sat in his car outside AIB with beads of sweat making their way down his face. The Nissan Ireland boss had thousands of new cars set to arrive that would wear 131 licence plates. But there was one snag: he had no way of paying for them. "Permanent TSB had been our provider of corporate finance for many years but unfortunately, due to reasons totally separate from the car business, the bank decided to step away," McCarthy says.

"We were looking into 2013 without a wholesale finance line, so we had a lot of cars coming into us that were due to be sent out to our network, but we were struggling to find a replacement for PTSB. We knew the cars were coming; the problem was how we were going to pay for them effectively."

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In the midst of what he describes as a "minor existential crisis", McCarthy made a phone call to AIB. "I tried to say as casually as possible, even though there were beads of sweat running down my forehead, 'are you guys in the asset finance game these days?' They said that it was funny I had asked and that they were trying to re- energise their asset finance business, so I took a deep breath and said, 'we might have some business for you'," he recalls.

Within a month, credit lines worth up to €70m were established with the bank and Nissan Ireland survived its close call. McCarthy's seven years at the helm have not always been as stressful as that. In fact, back in 2012, he testifies to having a strong underlying business. But now, he and many other manufacturers are facing intense challenges from the likes of changing ownership models and the continuous surge in used car imports.

The Cork native was not always a car man; in fact, he originally qualified as a lawyer from UCD. He graduated in the early 1980s, which was not a "bountiful" period for people in his line of work, and headed for the US, where he worked at a corporate law firm in New York. Following that was an MBA from the University of Pittsburgh and 20 years at the 'boutique' Corporate Finance Ireland.

While such a background may not naturally lead to a job at the top of one of Ireland's most popular car brands, McCarthy's love of all things electric is obvious. He also happily squares up to those suggesting electric vehicles (EVs) may not prove all they are cracked up to be.

"The carbon footprint from an EV, even from a fossil-fuel-sourced thing, is still substantially lower than an internal combustion engine. However, the more renewable and the cleaner the original source of fuel, the better," he says.

"You'll always have members of the flat Earth society trying to deny that EVs have a positive impact on the environment. But they've probably been busy denying that there was a moon landing for the last few weeks, so we haven't heard from them. The case for EVs is irrefutable. When I'm talking about members of the flat Earth society, I'm talking about two of them from down in Kerry who just feed disinformation about electric vehicles."

McCarthy says one such Kerryman had suggested batteries were "breaking down" after a couple of years, something the Nissan chief vehemently denies: "We have 4,400 Leafs on the road in Ireland and we've had three issues with battery components."

The Government has set about cleaning up the country's fleet and aims to have over a million EVs on Irish roads by 2030. While a noble goal, an analysis of the figures paints a picture of a near-insurmountable task. The aim comes in addition to a soon-to-fail plan to have 10pc of all cars electric by 2020, a target set back in 2010.

Previous failings in State strategies have bred a degree of suspicion within the Nissan chief. "They have been excellent at making promises but they have not been great on their commitment to upgrade the charging infrastructure," he says.

"We are beginning to see some movement but you're also seeing private networks stepping in and developing their own ports. The charging infrastructure is improving all the time but what the Government needs to do is, rather than making long-term commitments which are noble (and we should applaud that ambition), make more measurable short-term goals."

One such goal, McCarthy says, would be to double the number of chargers within the next 12 months. He says it would be "very achievable". "Making a commitment to do something by 2030 means the people making those commitments will no longer be in their roles," he says. "What we've found in other countries is that infrastructure leads adoption; we're kind of doing it the other way around. We're waiting until there's mass adoption and then we'll put in the infrastructure."

While strides are being made in cleaning up the Irish fleet through gradual EV sales, some considerable backward steps are undoing a lot of the gains, according to McCarthy.

Used car imports have grown considerably over the past number of years as vehicles from the UK become more competitive. A divergence between the tax paid upon importation and weak sterling has meant that used cars have become very attractive to Irish motorists. While an obvious issue to car dealers here, it may have more long-term effects on the Irish economy. The practice has been criticised for turning Ireland into a 'dumping ground' for the UK's unwanted cars.

Speaking in a hotel in Charlemont in Dublin city, McCarthy jokes that discussing used car imports could "ruin my morning". "The used imports are a feature of the marketplace and they have an advantage over new cars in that they benefit from preferential tax treatment," he explains.

"Why the Government would support a policy that effectively incentivises people to take in older cars as opposed to buying newer, cleaner cars I cannot understand. It completely flies in the face of all the statements regarding lowering emissions from our transport fleet."

A recent report from the Tax Strategy Group (TSG) highlighted the problem around the high levels of imports hitting Irish shores. It recommended the number of tax bands on the vehicle registration tax (VRT) increase from 11 to 14. A top-rate VRT would be charged at 39pc on cars with emissions of over 200g/km."They do identify that used imports are a problem for the environment and the Exchequer," the Nissan chief says.

"They then suggest some actions that might address the anomaly that used imports get taxed on a preferential basis effectively. But when you run the numbers, it actually doesn't have the impact that they want to have. That TSG document is a good document in terms of being consistent with stated Government policy of lowering emissions."

McCarthy says that a high tax on a vehicle's nitrogen oxide would act as a significant deterrent on the introduction of so-called 'dirty diesels' to the Irish fleet. He jokes that the UK is "causing us a lot of grief at the moment", adding: "Bad enough they're trying to destroy our economy, ruin the good name of our politicians; but they've also been dumping their problematic cars on us."

Nissan Ireland is made up of three businesses: namely its distribution business, the Windsor Motor Group, and the commercial arm of the Sixt leasing group. Much of the research on car-buying is pivoting towards online, but McCarthy insists retailing will remain a central element of sales. Such a commitment can be found in the company's multi-million-euro investment in its branch off the M50. "It's a real commitment to the retail model at a time when people question whether or not it has legs," he says. "We really see retailing as being central to the sale of cars and see that continuing. However, how that operates is going to evolve."

The Nissan group has also taken strides in making dealerships "less intimidating" for women. The group's retail network has undergone a significant rebrand to make it more accessible.

With numerous innovations in motor technology, car ownership is going through significant disruption of its own. The use of car-sharing companies like GoCar has continued to become a more popular transport choice for Irish people.

Similarly, the adoption of the controversial personal contract plan (PCP) was rapid. A recent Central Bank report suggested there was €800m in PCP finance extended in 2016 alone.

McCarthy's company is working on bringing in what he believes will be the "natural evolution" of PCP. Think Spotify for motors; subscription cars.

"We're very enthusiastic about the prospects for our leasing business and it's in there that we see significant growth opportunities, because that is the business that can pivot into the personal contract hire (PCH) business," he says.

"We're looking to develop partnerships and we're in advanced discussions with potential partners to develop personal contract hire solutions.

"If you look at how people own cars in America, that's all PCH. You're looking at driving a Buick Continental for $286 (€255) a month; that's all they look at."

The Nissan boss expects to have a PCH product ready to go to market in January, having agreed a couple of "key partnerships". "As it's a new product, it's quite difficult to say what the take-up of it will be like," he says. "A good reference point is to look at how quickly the market adapted to PCPs, and I think PCH is a much more suitable product. I don't think it will be much cheaper, but you'll see the difference in that you don't need to stump up a lump-sum deposit to get going."

Seven years ago, the company was struggling to find a finance partner. While that may be a distant memory stuck in the rear-view mirror, many challenges remain.

Imports, uncertainty and new technologies are all on the horizon. But McCarthy is confident the business is flexible enough to meet the needs of an ever-changing customer base.

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