The government could hand out discounts of up to £6,000 if drivers make the switch from petrol and diesel to electric and hybrid cars in a new scrappage scheme.
Prime minister Boris Johnson could announce the move in major speech next month to kickstart the UK economy, reports The Telegraph.
Car Dealer Magazine was the first to report on calls for a new scrappage scheme to boost the industry back in mid-April.
Now, there are a number of reports a new scrappage scheme could be part of a series of ideas designed to ‘level-up’ the economy.
It’s likely to be similar to Gordon Brown’s 2010 scrappage scheme whereby new car buyers were offered hefty discounts to buy new.
The first scheme was launched following the fall out from 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 with the government’s £1,000 matched by manufacturers.
The scheme lasted 10 months and enabled 390,000 new cars to be purchased.
A new scheme following the coronavirus pandemic could help kickstart the new car market in the UK which was down 97 per cent in April, and 89 per cent in May.
The PM’s speech, which is currently scheduled for July 6, will come two days after the planned third phase of the easing of the lockdown.
Commenting on the proposed scheme, Edmund King, AA president, said it would be a ‘fantastic move’ and should it get the green light ‘people should take up the deal’.
‘At the start of the year we said that scrapping VAT on electric vehicles would be the most influential move to persuade drivers to go electric,’ King said. ‘A grant like this would be just as good and would help both car manufacturers and air quality.’
King went further and said the scheme should be part of a wider package of investment into the car industry.
He said: ‘In order to help aid the economic recovery to Covid-19, investment should also be made in gigafactories. This would mean batteries could be developed, built and recycled in the UK to to keep our carbon footprint down, while producing highly skilled jobs. We also need more charging points to help convince drivers that they can always get home.’
RAC head of roads policy Nicholas Lyes predicted that a scrappage scheme ‘might be the game-changing boost the automotive sector needs’.
He added: ‘Drivers’ concerns about emissions are becoming ever stronger and interest in zero-emission vehicles is increasing.
‘But many continue to say that the upfront cost of electric vehicles compared to those of similarly sized conventional vehicles is a barrier to them switching so any sort of scheme which tackles this would be very welcome.
‘Clearly, there would need to be some consideration as to how this would work with the existing plug-in car grant scheme.’
The news comes as the car industry renewed its call for some form of stimulus for the new car market.
Speaking to Sky News yesterday, Marshall CEO Daksh Gupta said: ‘We would welcome any stimulus for the sector, whether that be a scrappage scheme, grants or some form of VAT discounting. Stimulus is needed for the sector.’
Me on @SkyNews earlier explaining why the sector needs stimulus. It’s a corner stone of the U.K. economy, £18.2BN paid in taxes and employs 800,000 people. We work off small margins, typically 1% with significant costs to make that so it’s clear to see, we need support. pic.twitter.com/xcSjejwGRK
— Daksh Gupta (@MarshallMotorGp) June 7, 2020
He later added: ‘The UK automotive industry is a key corner stone of the UK economy – £18.2bn paid in taxes and it employs 800,000+ people, 75 per cent of which are in retail.
‘The sector works off small margins – typically one per cent – with significant costs to make that so it’s clear to see we need support.
‘The government has done a good job so far in trying to keep the economy going with things such as the 100 per cent rates grant for 12 months and the job retention scheme benefiting our sector in particular.
‘Stimulus by way of a grant for all new cars would be very welcome as it would benefit all manufacturers.
‘The treasury makes 20 per cent on every new car sold so half of that would be good for consumers and for the treasury. More new cars on the road will also help towards the government’s long-term goals towards zero-free emissions in 2040.
‘Additional incentives to support getting older vehicles off the road would be good as well as support for buying low CO2-emitting cars.’
Last week it was reported the SMMT had written to the government saying any scheme should ‘support the entire market, not just disproportionately favouring specific segments or technologies, recognising the diverse nature of UK automotive manufacturing’.
Car manufacturer bosses have been making calls for a scrappage scheme for some time to Car Dealer Magazine.
JLR boss Rawdon Glover told Car Dealer Magazine of the need for a new scheme, while Alison Jones, Groupe PSA boss, said delaying a decision on a scrappage scheme would have a negative impact on new car demand.
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