With a population of around 4.8m, the Republic of Ireland is one of the smaller countries in Europe, forming the bulk of the island of Ireland after the country was partitioned in 1922. Ulster in the north-east of the island has remained part of the United Kingdom ever since.

Ireland was particularly badly affected by the 2008 financial crisis, leaving the country with heavy debts and a banking crisis. Property prices rose steeply in the years before 2008, encouraging heavy borrowing to fund property purchases. The resulting collapse left banks and individuals with a large debt burden.

Financial recovery, strong car market

It’s a different story eight years on. Ireland has made a remarkable recovery which has been led by export business in the biotechnology, finance and computer services sectors. Ireland has developed expertise in attracting inward investment over many years and that seems to have helped the country to recover.

Arguably this is good news too for the business car sector, where it would be reasonable to expect growth in the Irish car market, although against that, the Irish population is concentrated around two major cities, Dublin on the east coast and Cork in the south. Over 40% of the population lives within 100km of Dublin according to the CIA World Fact Book. There are smaller concentrations around Limerick and Galway, further west from Dublin. Outside the cities though, agriculture is a cornerstone of the economy and the population is spread thinly across the countryside. Access to a car is important for such a rural population. Overall, around 33% of the population is under the age of 25.

Data from the Society of the Irish Motor Industry (SIMI) shows that new passenger car registrations reached 99,708 for the first five months of 2016, with the highest volume in January (39,722) followed by progressive decline through the following months. That compares with a total of 80,889 for the same period in 2015, representing a 23.3% increase over the January to May period in 2015. Sales followed a similar pattern with high registrations in January followed by similar declines as the year proceeded.

The January peak is explained by the Irish system of car registrations. Like the UK, there are changes of vehicle registration plate twice a year with new plates in January and July. As the 2015 registrations graph shows, there is a similar pattern to each half year, with registrations peaking in January and July followed by progressive decline until the next plate change. The fall-off in sales is more pronounced through the autumn and winter months.

For 2015, SIMI data shows full year passenger car registrations of 124,947, a figure that should be exceeded in July this year. That total represented a 29.8% increase over 2014 registrations. A report from the Bank of Ireland suggests that part of that performance was fuelled by scrappage and trade-in offers. This report forecasts that new car sales will reach around 160,000 by the end of 2016.

As the manufacturer data shows, the market is tightly contested with comparatively few registrations separating Volkswagen, Toyota and Hyundai. Toyota has had a strong presence in the Irish market for many years and continues to be a top-performing brand there. Volkswagen was the leading brand in 2016, with the Volkswagen Golf the best-selling model, a pattern similar to many other markets in Europe.

Tucson leads the market

But the pattern has changed for 2016, where the best selling model is concerned.

Tucson sales only began in 2015, when the car took 158th place in the Irish registrations table, but this is a notable change, with an SUV as the best selling model in the country. SUV sales have been steadily rising in Ireland, not surprising given that many minor roads are of comparatively poor quality. The Tucson’s predecessor, the ix35 only achieved seventh place last year, with the Qashqai in third place, making it the best-selling compact SUV in Ireland in 2015.

Data on sales by body type suggests that hatchback models are the best selling so far this year, but MPVs now occupy second place. Traditional saloon cars with a separate boot were traditionally the preferred body type, but this body style is now the third best-selling type in 2016. SUVs are classified generically as ‘Jeep’ in Ireland and are the fourth best-selling body style so far in 2016.

Diesel is still the preferred fuel in Ireland, with diesel-powered vehicles accounting for some 70.5% of the market so far in 2016. Diesel fuel is currently around 12% cheaper than petrol, which helps to explain its popularity. Petrol/electric hybrid models have accounted for 1.6% of the car market this year, while take-up of electric cars is small, accounting for just 0.28% of the market. That may be small but it is the largest alternative fuel sector in the Irish car market, with plug in petrol-electric hybrids accounting for 0.15%.

Sharp rise in CV registrations

Commercial vehicle sales are usually a good barometer of the health of an economy and for 2016 Light CV sales are running 26.7% ahead of the January to May period in 2015. SIMI data for 2015 shows that total LCV registrations for the year rose by 41.7% compared with 2014. For 2016 Ford is the market leader with Transit leading the Transit Connect, followed by the Volkswagen Caddy in third place.

The heavy truck market is growing at an even faster rate, with registrations in 2016 running 53% ahead of 2015. Scania is the best selling truck brand, with Volvo close behind and Volvo leading the sales charts for specific models. The models selling well suggest growth in both the distribution and construction sectors.

SIMI has carried out its own analysis of the first quarter of this year. Author and economist Jim Power points out that the Irish economy returned to pre-financial crisis levels of activity by early 2015 and has continued to improve since, supported by rising levels of employment and tax revenues on the increase. Power believes that GDP growth could reach 4.5% in 2016.

Immediate concerns about the Irish economy are centred on the UK referendum on 23rd June, concerning continued membership of the EU. The UK is Ireland’s biggest trading partner and there are very real concerns about how the Irish economy might be affected by a vote to leave the EU.

Insurance costs rising

The cost of motoring has also helped the motor industry. Power writes, “In the year to March, the cost of petrol was 11.1% down on a year earlier; the cost of diesel was down 17.7%; and the price of an average new car was down by 2.8%.” On the other hand, insurance costs are rising, “The cost of insurance increased by 32.4%, and is now 47.6% higher than March 2012.” This appears to be related to the increase in the number of insurance claims.

Despite the strengthening economy, Power highlights areas that could still challenge economic growth. This includes a banking sector that is still not functioning effectively, particularly for SMEs, a target area for many vehicle leasing companies.

New cars attract VAT at a rate of 23% and new vehicles must also pay a vehicle registrations tax (VAT). This is banded by CO2 emissions, and the tax increases with the emissions level. The rate of tax, based on the vehicle’s open market selling price (OMSP), starts at a rate of 14% OMSP for cars with CO2 emissions up to 80g/km and rises to 36% OMSP for cars with CO2 emissions over 226g/km.

It is not easy to find data on the Irish car leasing sector. The pan-European organisation Leaseurope does not carry data. When we last looked at Ireland, business cars accounted for around 20% of new car sales. With the increase in new car sales in Ireland and the strength of the economy this figure may have increased slightly.

The Bank of Ireland points to a weak used car sector, the result of the prolonged financial problems after the 2008 crisis. With limited choice, there is a ready market for ex-fleet cars, which should help to ensure good residual values for the next two years, reckons the Bank.