I trawled through the CSO database on vehicles registration, trying to find some information concerning the efficiency of our emissions-reducing policies on taxation of vehicles and found some pretty interesting results. Here are the latest charts, for the data ending June 2010.
The first chart above shows all passenger vehicles registered (new and used) on a monthly basis. It clearly highlights the fact that our license plates act as a major vanity point. There are severe peaks in January each year, followed by more demand-driven local peaks in May-July (as families prepare for vacations). It is also interesting to note that despite the scrappage scheme and the psychologically significant change to ‘10’ plates, January 2010 was still posting fewer vehicles registrations than January 2009. Instead, what is significant in 2010 is the return of March local peak – a feature of 2006-2007.
There is a clear and strong dominance of demand for diesel engines, compared with petrol. This trend started in July 2007 – a year ahead of the new taxation system based on emissions was introduced.
And the ‘vanity effect’ is even more evident in new vehicles registrations (chart below):
Chart above clearly shows lack of demand for alternative fuel vehicles. It also shows that prior to 2010, peak demand months for cars was not coincident with peak demand for alternative fuel vehicles, suggesting different structure of the market for normal passenger vehicles when compared to alternative fuel vehicles. However, the data is still thin on alternative vehicles, as their sales prior to the recession are extremely thin. Finally, an interesting feature of this data suggests that during the recession, demand for alternative vehicles has been slightly more robust than for ordinary types of vehicles. This is most likely due to demographic of purchasers – more urban, professional, more secure in their jobs consumers of alternative fuel vehicles are also more likely to weather the recession with greater confidence than the general population. (Note of caution: given the short term horizon of this data, and low levels of alternative vehicles sales, these points are ‘educated guesses’ rather than hard evidence).
Diesel vehicles make up the vast majority of eco-friendlier Band A vehicles in Ireland, while heavily subsidised alternatives are lagging well behind petrol engines in comprising ecologically cleaner segment of Band A vehicles. As a driver of a mid-size diesel with emissions equal to a smaller and less comfortable Toyota Pious (ooops… Prius), I am can testify to the fact that our Government policies currently reward vehicles few of us want to drive, yet which pollute as much as (or as little) as vehicles people actually choose. It does seem to me that should Ireland’s Greens pursue in earnest their objective of cutting emissions, they should provide better incentives to cleaner diesel technologies.
Notice that a greater proportion of the diesel engines registered in 2010 are Band A emissions, compared to all alternative fuels (hybrids etc) combined. In proportional terms, hybrids etc are less emissions-reducing than the average new vehicle registered, while diesels are more emissions abating. This is a new trend since January 2010 and most likely reflects two changes in demand and supply: firstly, there is a new generation of diesel vehicles coming into the market, and second, there demand has shifted in favour of smaller (and cheaper) diesel vehicles (a recession effect?).
Two charts below plot 12 manufacturers that supply the largest share of Band A vehicles relative to their overall cars supply to the market in Ireland. The rankings are dominated by smaller engine diesel suppliers.
Chart below breaks down alternative fuel vehicles (including hybrids) into new vehicles purchased and used vehicles purchased. It clearly shows that for now, sales of alternative fuel vehicles are dominated by new car purchases, which, of course, means that our drivers of these vehicles are years away from realising real net emissions savings. Remember, production of every new car requires serious emissions, so unless a new car is driven significant number of miles, buying a used car in place of the new one is actually contributing less emissions, especially if the used car belongs to the same emissions band category as the new one.
Thus, once again, economic efficiency argument suggests that incentives for purchase of new lower emissions vehicles should be extended to cover used lower emissions vehicles as well.
Chart below shows the demise of the petrol engine and the rise of diesel engine during the current recession. It also shows a relatively flat trend for alternative fuel vehicles. However, the alternative fuel vehicles trend line remains upward sloping through the current economic crisis.
The really amazing figure is the following one. As can be seen from the chart below, even petrol-fuelled vehicles in Band A category are more prevalent than all alternative fuels vehicles, and the trend is so far driving this difference even further. Once again, a more efficient (from economics) perspective means for reducing Irish motors-related emissions is to have incentives for buying lower emissions vehicles. Not those run on alternative fuels, but ones run on diesel and petrol. As long as they fit into Band A…
and in year on year changes in levels of sales:
However, as the last chart above shows, luxury vehicles have posted a more significant rise in year on year changes in sales over 2010, than their more price elastic (and thus scrappage scheme elastic) counterparts.
Notice high coefficients of determination, signalling high explanatory power of the ‘vanity’ effect (sales of luxury vehicles) on overall sales (sales of cheaper vehicles). Given that the demand for cars around January of each year has nothing to do with actual fundamentals-driven demand, tending to follow instead the pinned up demand in realisation of the ‘vanity’ plate effects, these relationships provide an estimate of the ‘vanity’ effects on overall demand for new cars.
Removing this effect from the sales of new cars, table below shows clearly that vanity effects accounted for more cars sold in all months of 2010 so far. In other words, scrappage scheme introduction, alongside all other factors (such as significant depreciation of older vehicles, increases in family sizes, etc during 2008 and 2009 crisis years) have been responsible for lesser number of car sales than the ‘vanity’ effect of having a 2010 license plate.
Of course, this is not a perfect estimate, but the persistency with which the numbers come out to show the power of the completely silly license plates vanity ‘competition with the Joneses’ is frightening. Oh, and it does show that the Government didn’t really ‘save our auto retail industry’, but rather once again helped inflating the artificial demand.
