10:43 am, April 27, 2020
A scrappage scheme or other incentives to get Britain’s slumbering car industry moving again are gathering support.
Calls for a scheme were first reported by Car Dealer Magazine on April 17, industry insiders are now briefing the wider press that a scrappage scheme linked to government ambitions on reducing CO2 could help the beleaguered car industry.
The Sunday Times reported yesterday (April 27) that a ‘cash for clunkers’ scheme was being largely hailed by car manufacturer and suppliers bosses as the best way to support an industry that has seen factories closed and dealerships shut.
Unipart chief executive John Neill – who supplies half the UK’s car production with fuel tanks every year – told the paper: ‘Make up your mind if you think this is a strategic industry or not. If you let it go, you can’t recreate it, and that will have a devastating impact on jobs, taxes, exports and economic growth.’
The new car market could be down as much as 98 per cent in April following a 44 per cent fall in March.
With many consumers cutting back on spending and the rate of unemployment set to continue to increase, a scheme which incentivises buyers to swap an old car for a new one could get the market firing again.
Professor of business economics at the Birmingham Business School David Bailey told Car Dealer Magazine said: ‘With dealers closed and economic activity taking a big hit, car sales are down dramatically, but what will happen when the lock down ends? It’s difficult to say, and that depends on how quickly the economy bounces back.
‘At some point we may see some sort of incentive or scrappage scheme to encourage buyers back into the market – that would work best if governments across Europe did this too.’
How a scrappage scheme would work would need careful consideration. It needs to be finely balanced between taking the most polluting cars off the road and replacing them with greener models.
The last scheme – which ran in 2009 and saw 390,000 people buy new cars thanks to a £2,000 cut, part-funded by government and part by manufacturers – was criticised by some for taking classic cars off the road.
However, few would argue against a scheme that tackled the highest polluting cars in a drive to improve air quality at the same time.
Mike Allen, of Zeus Capital, said: ‘Research by Frost & Sullivan suggests it will take the industry three to four years to recover with most thinking that won’t start until the first quarter of 2021. However, there is belief that the auto industry will create some interesting incentives to stimulate demand.’
The UK automotive industry is responsible for 823,000 jobs and 1.3m cars are produced in the UK every year. It generates £82bn in turnover and contributes 14.4 per cent to UK goods exported.
At the time Car Dealer ran its original story on calls for a scheme, the SMMT’s Mike Hawes said: ‘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.’
That time could be fast approaching.
As plans for a partial lifting of restrictions gather place in government, pushed by the return of Prime Minister Boris Johnson today, the need for the automotive industry to make its case has never been greater. Many in the industry are hoping lobbyists are doing just that.
David Kendrick, partner at accountants UHY Hacker Young added: ‘A scrappage type scheme would be fantastic news for the industry, however I am unsure whether the government would have funds available to be allocated with everything else going on.
‘Anything to stimulate the market would certainly be well received with many dealers worried about what re-opening looks like on the car sales front.’
There will certainly be a queue of business sectors lining up for government support when the lockdown is lifted and the economy gets back to work.
Where the automotive industry will be in that queue remains to be seen, but there should be hope that the last scrappage scheme was actually revenue generating for the government thanks to the VAT receipts.
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