'We need help from Government to drive growth'
While car sales are again on the rise, VW's man in Ireland Simon Elliott insists that the Irish motor industry could benefit from a full service
TWO years and eight months ago I moved to Ireland to take over as CEO of Volkswagen Group Ireland, with responsibility for Volkswagen, Audi, Skoda, SEAT and VW Commercial vehicles.
At the time I was warned that I was about to enter a world of depression, and that buying cars or commercial vehicles was so far off the agenda that it would prove to be an impossible challenge.
Around 250,000 new cars had been sold just before sales plummeted to 56,000 in 2009. The Government's scrappage scheme helped stop the slide but when this was removed the market dipped again in 2013 to just 74,000.
So when the industry, together with the Society of Irish Motor Industry, pushed to get further government support, I imagined that the public perception of the auto industry was that they were always trying to jump the queue for help.
The facts are that while we still believe the Government should support the industry that gives more than any other to the Exchequer, it is also down to the industry to dust itself down and get to work.
That has been my strategy since I arrived in August 2011.
If you are playing in what is perceived as the fourth division, all you can do is win the league you are in – and that's what we've set out to do.
I have five brands to keep my eye on and while we account for 27 per cent of the new car market and 23 per cent of the commercial vehicle market, this is not a given. This has been achieved by going back to basics, by maintaining a presence in the media, through our sponsorship strategy and with a strong emphasis on PR, letting consumers know exactly what we are doing and giving them confidence that the brand is not here today gone tomorrow.
At VW we are proud that, in the Fifties, Ireland was the first country outside of Germany to build VWs – at the manufacturing facility on the Shelbourne Road in Dublin.
The economy does seem to be showing positive signs of recovery and that seems to be rubbing off on people's confidence. The car market is 25 per cent up so far in 2014 and from a forecast of 80,000, is looking more like 85,000 to 90,000 this year.
However, the Government now needs to support the industry and not see us as a cash cow and stifle the market which needs to be well over 100,000 units to support the dealer network infrastructure.
For me, the growth this year in the commercial vehicle market is the biggest sign that things are improving. A 40 per cent increase in van sales is very reassuring and with the majority of these being local sales from our dealers, perhaps this is the best sign yet that confidence among small business owners is once again returning.
The fact that at VW we have our own bank is certainly helping local business. In 2013 VW Bank loaned around €150m to consumers and business owners in Ireland when many were still finding funding tough to find.
This business confidence is delivering growth. We are seeing this across the VW Group and its dealers where we employ more than 1,000 people. And already we are seeing staff numbers growing, apprentice programmes being developed and demand for customer-facing staff.
When you stand back and look at life from the car-driving consumer's point of view, here in Ireland we have the oldest car stock in Europe with an average vehicle age of nine years.
There may have been confusion in the market with the 13 plate turning into 131 and 132, and of course this is now a fixed change cycle twice a year with 141 and 142 this year and 151 and 152 next year.
As more new registrations are seen on the road there is less of a stigma to be seen in a new car, especially when you look at the growth of premium cars such as Audi.
The one unfair issue is the VRT paid by the industry. With only two countries in Europe having to suffer this extra tax, some innovative safety features are proving to costly to bring into this market. This cannot be condoned and in my opinion this tax should be scrapped.
The government coffers would benefit as the market would grow significantly.
This would also generate more used vehicles and support dealer profitability still further.
The tax has distorted the car market here for many years, resulting in Irish motorists paying some of the highest prices after tax for new vehicles in Europe.
For example, Irish motorists pay an average of €4,381 VRT per new car, which is an entirely extra tax, meaning we pay a fifth more for our cars in Ireland than our near neighbours in the UK. Can this be fair?
People ask me, what is my proudest moment of the last two-and-a-half years? My answer is easy: increasing our internal staff satisfaction to 93 per cent in such a challenging environment.
Of course, while VW being number one, Golf being the best-selling car, Audi heading sales in the premium sector, records for SEAT and Skoda and a great performance in the commercial vehicle sector is all very pleasing, being a 'great place to work' makes targets easier to achieve.
I have a lot of hope for the future, especially riding on the back of the commercial vehicle barometer that means consumers and small-business confidence is better. However, our focus should not be just on Dublin as we need the entire country to grow on this wave of optimism.
Let's nurture what we have and boldly go forward; believe and it will happen.
Simon Elliott is CEO of Volkswagen Group Ireland
Sunday Indo Business