The number of new cars sold in January 2011 was up 30% on last years figures while February 2011 also proved to be a good month for car dealerships as sales increased by 15% on last February. Figure 1 displays the total number of new private cars licensed per month from January 2009 to February 2011.
While the seasonal pattern of the industry can clearly be observed in the graph it is clear that each year since 2009 has seen an increase in new cars licensed. In 2009 only 54,000 new cars were licensed however in 2010 this figure increased to almost 85,000 and already this year new car licenses have reached 27,000. These increases would appear to be the result of the government’s move to introduce scrappage for new cars when trading in a car 10 years or older. If this is the case we can undoubtedly deem this policy intervention a success. The numbers of new car licenses proves this point. However, what is the benefit of this policy to Ireland?
Two positive externalities were identified as arising from the introduction of the scrappage scheme. Firstly, that it would save Irish jobs in the car dealership sector. This would prevent further job losses and additions to the dole. Secondly, it was also to provide a mechanism through which individuals would switch from older, more polluting cars to modern, more environmentally friendly cars. However, are these really worth the government getting involved to artificially support a market?
The reason why the car dealership industry was struggling was due to the current economic downturn and subsequent decline in disposable income available to the Irish population. This has general implications for a number of industries across the economy. However, Irish car dealerships have been singled out for specific, advantageous treatment. Why is this the case? Presumably it is because they have a powerful lobby group with which to put forward their arguments to policy makers. The intervention in the market is keeping dealerships open which would not have been able to survive without government support. However, what will happen when this support is removed? Will the dealerships still be able to survive? If not, then the support is providing nothing more than a short lived reprieve. The levels of consumption and spending experienced during the Celtic Tiger were unsustainable and will not be available to Ireland again in the future. Therefore, it could be argued that the intervention in the car dealership market provides little long run economic benefit.
Two positive externalities were identified as arising from the introduction of the scrappage scheme. Firstly, that it would save Irish jobs in the car dealership sector. This would prevent further job losses and additions to the dole. Secondly, it was also to provide a mechanism through which individuals would switch from older, more polluting cars to modern, more environmentally friendly cars. However, are these really worth the government getting involved to artificially support a market?
The reason why the car dealership industry was struggling was due to the current economic downturn and subsequent decline in disposable income available to the Irish population. This has general implications for a number of industries across the economy. However, Irish car dealerships have been singled out for specific, advantageous treatment. Why is this the case? Presumably it is because they have a powerful lobby group with which to put forward their arguments to policy makers. The intervention in the market is keeping dealerships open which would not have been able to survive without government support. However, what will happen when this support is removed? Will the dealerships still be able to survive? If not, then the support is providing nothing more than a short lived reprieve. The levels of consumption and spending experienced during the Celtic Tiger were unsustainable and will not be available to Ireland again in the future. Therefore, it could be argued that the intervention in the car dealership market provides little long run economic benefit.
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