Scrappage scheme call from SMMT as leaked letter reveals trade body wants £2,500 incentive for car buyers

Time 1 year ago

The SMMT has written to the government to propose a scrappage scheme that would cut £2,500 off the price of a new car, according to reports.

The much-mooted stimulus package for the car industry would see buyers offered £2,500 savings to scrap older cars to buy any new model they want.

The Guardian reported that the SMMT had told the government in a letter that any scheme should ‘support the entire market, not just disproportionately favouring specific segments or technologies, recognising the diverse nature of UK automotive manufacturing’.


A government spokesman said: ‘We have recently reopened car showrooms in England to help kick-start car sales and we continue to engage with the automotive industry during this time to offer support and look ahead to our recovery from the coronavirus outbreak, including investing in green technologies.

‘The government has put together a far-reaching package of support to help businesses through the coronavirus pandemic including schemes to raise capital, flexibilities with tax bills, and financial support for employees.’

Industry leaders Car Dealer Magazine has spoken to have called for the scheme to be open to all. Jaguar Land Rover managing director Rawdon Glover told us he wanted the scheme to be able to boost sales for his models too and be in place by July.

The SMMT proposal would see £1.5bn pumped into the scheme – if the government allowed – and help boost the market by 600,000 models.

In the SMMT letter sent to the chancellor, Rishi Sunak, and the business secretary, Alok Sharma, in May the paper reports the trade body is pushing for ‘confidential discussions’.

The SMMT’s chief executive Mike Hawes says that the 600,000 new cars would mainly be ‘additional in an otherwise moribund market’.

The SMMT also points out that the scheme ‘could also support wider government ambitions in terms of climate change and improved air quality’, adding the ‘primary benefit would be in jump-starting the market, the sector and the economy without further drain on the public purse’.

The SMMT also tells the government that a government backed scheme would bring a net benefit to the government of around £3 for every £1 spent through tax and VAT receipts.

It would also help get more people in the automotive industry off the furlough scheme which is costing the government dearly.

New car sales figures for May are due to be released later this morning and are expected to be down by as much as 90 per cent.

The French president Emmanuel Macron announced a €7.1bn plan to revive the French motor industry that has seen sales tumble and production halted earlier this month which included a scrappage scheme.

The scheme will see buyers of electric and hybrid cars given extra subsidies and funds for hydrogen power and self driving research in a plan designed to ‘relocalise’ car manufacturing in France.

It aims to shift the unsold cars produced recently – expected to total 500,000 – and will see buyers of an electric car given €12,000 off the purchase price.

Car Dealer has reported on calls from the industry here for a scrappage scheme for weeks.

Alison Jones, PSA Groupe MD, told us a stimulus package to boost new car demand is needed. She thinks one could be introduced in July so it ties in with Q3 targets and the September plate change.

But the problem – as Jones identified in an interview with Car Dealer, a clip of which you can see below – is that the more a scheme is talked about the higher the chance those buyers not so desperate for a new car hold off until one is announced.

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She said: ‘The first of July was a suggestion and is linked to the September car market, but what I would say is that any decision needs to be made sooner rather than later, because if customers think there is a stimulus package coming then that won’t help us in getting the industry started.’

Meanwhile, calls for a scrappage scheme have come from industry group Make UK too.

It says a voucher-style system, where the government gave a contribution of around £5,000 for each new car, would deliver an incentive for households to upgrade, with industry contributing the trade-in value of the old model, said the manufacturers’ organisation.

James Baggott's avatar

James is the founder and editor-in-chief of Car Dealer Magazine, and CEO of parent company Baize Group. James has been a motoring journalist for more than 20 years writing about cars and the car industry.

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