Calls for a new scrappage scheme to help boost sales when the industry gets back to work have been mooted as an ideal way to boost the flagging car industry.
A scrappage scheme that targets older, polluting cars and incentivises buyers to purchase a cleaner, greener model could be the catalyst the car market needs to rebound, believe experts.
In 2009, the UK government introduced a car scrappage scheme following the financial crisis to boost the car market. It totalled £400m and gave buyers £2,000 off a new car if they scrapped a model aged 10 years or older – the government’s £1,000 was matched by manufacturers.
The scheme lasted 10 months and enabled 390,000 new cars to be purchased.
The SMMT’s chief executive when the scheme was introduced, Paul Everitt, said at the time: ‘The introduction of a vehicle scrappage scheme will boost the new car market, encourage consumers to get back into car showrooms, and reduce the likelihood of employee downsizing in this sector. It will kick-start demand in the marketplace.’
With the car market again in free-fall and car dealers shut, thoughts are turning to how it can be boosted when the UK lockdown is lifted. Many think a new scrappage scheme would be an ideal way to kickstart demand.
Amount of subsidy in 2009 scrappage scheme
In China, as lockdowns are lifted and the economy restarts, the government has announced a string of subsidies to help the car industry recover.
Beijing has offered subsidies and tax cuts for greener models such as electric and hybrid cars. And it is also offering cash incentives to encourage the replacement of heavily polluting diesel trucks. Most of this has been done by lowering the VAT rate.
A new UK scrappage scheme would be welcomed by the National Franchised Dealer Association.
NFDA head of operations Steve Latham said: ‘The NFDA would absolutely support a new scrappage scheme to help aid the recovery when it comes.
‘Right now our members are concentrating on survival, but when the recovery does come any government stimulus would help.
‘A scrappage scheme is revenue generating for the government in terms of the VAT receipts they would get out of it and it would be in line with their goal to promote green vehicles.’
He suggested a scrappage scheme could be aimed at Euro V diesel cars and older, and Euro III petrol cars and older. The scheme, he thinks, should allow customers to buy any car as a result of the government subsidy.
However, if a new UK scrappage scheme was introduced it’s likely it would fall in line with the government desire to move to greener vehicles.
Jim Holder, editorial director of Haymarket Media Group, publishers of Autocar and What Car? Magazines, said: ‘The car industry’s value to the UK, in terms of employment and value to the economy, is well documented, and if the market needs kick-starting then a scrappage scheme has proven value in doing so, as well as the dual benefit – you would assume – of being aimed at encouraging uptake of lower emissions vehicles.
‘But, of course, it’s also crucial that the nation’s depleted coffers are spent in the right ways post-crisis, and I’m sure the car industry will be acutely aware that it must prove that it is a deserving case prior to any stimuli being offered.’
The 2009 UK scrappage scheme was revenue-generating for the UK government as VAT receipts were higher than the £1,000 subsidy it offered buyers.
The SMMT, however, isn’t keen on pushing a scrappage scheme – yet.
Mike Hawes, SMMT Chief Executive, told Car Dealer Magazine: ‘Our immediate priority is to ensure the survival of the sector during this unprecedented crisis.
‘The time will come when we may need to assess what, if any, measures are needed to stimulate the market, and we will discuss with members and other stakeholders in good time.’
Car Dealer Magazine has contacted the Department for Business, Energy & Industrial Strategy, which would be in charge of such an incentive scheme, but it has so far failed to comment.