3:25 am, March 24, 2010
Industry expert Roy Kishor gives Car Dealer his thoughts on the end of the scrappage scheme in this exclusive guest blog.
THE end of the scrappage scheme gives an opportunity for us to reflect on its merits and to ask the question – should the scheme be extended or replaced – and if so in what form?
For me, the scheme was a no-brainer from the start, addressing the most fundamental issues facing the car industry today – lack of demand and emissions.
I also pointed out at the time that 75 per cent of the projected costs of the scheme would also be largely recovered via the VAT received by the government – a prediction that has been borne out by the facts.
By the time the scrappage scheme finishes, the government will have injected £400m into the scheme, and 400,000 new, more emission-friendly cars will have been sold that might otherwise not have been.
The government will have benefited to the tune of about £500-£550m of VAT on the incremental sales, assuming an average price of £8,000 per vehicle, and the majority of vehicles having been purchased in 2009, when VAT was 15 per cent.
Environmentally, the scheme has also been a resounding success, taking 400,000 older, more polluting vehicles off the road, and replacing them with vehicles that were several times more environmentally friendly.
According to the Society of Motor Manufacturers and Traders the average car bought under the scheme emits just 133.3g/km of CO2 – that’s nearly 27 per cent less than that of the average scrapped car.
From a holistic viewpoint, taking account of all the aspects that are involved, including economic stimulus, employment, emissions, safety and the environment, then a structured approach that has no time limit would be desirable as a replacement to the scrappage scheme.
Whichever political party forms the next UK government, they will need to think carefully about the most appropriate way to stimulate business and support the environment in these tough economic times.
An initiative that enabled consumers to purchase low emissions vehicles with zero rate loans, no road fund tax, and lower than average insurance costs, and particularly targeted older higher emissions cars and vans, would be a way to help maintain a consistent level of demand and to curb emissions.
Roy Kishor has more than 20 years’ experience at chairman and managing director level in motor industry companies and was formerly chairman of the Society of Motor Manufacturers and Traders Aftermarket Group.
