Industry banks on scrappage to halt new car sales decline

Dealers are preparing to grasp the opportunity offered by the scrappage allowance to help raise sales of new cars after a disastrous first four months of 2009.

The £2,000 incentive to scrap cars first registered on or before August 31, 1999, starts on May 18. It is needed to stem the fall in sales of new cars, which reached close to a quarter of a million year-on-year by the end of April.

But the SMMT expected confirmation of the starting date to further dampen demand in the first half of May.

Ken Savage, chairman of Perrys, said: “Scrappage gives us a new opportunity to talk to a lot of customers."We believe the scheme will increase showroom traffic and we are briefing our sales teams on the best way to increase sales.”

The importance of the scrappage boost was underlined by NFDA director Sue Robinson: “April’s registration figures – 24% down year-on year – highlight the state of the new car market and the need for the introduction of the scheme.”

Some dealers have reservations.

One managing director said: “The allowance should raise sales volumes, but I wonder how much revenue dealers will be left with after each sale.

"Some manufacturers are introducing a handling charge so they take £350 from each allowance.”

Another senior executive said: “Retail buyers will see a car advertised at £9,995 with all profit stripped out and expect to pay £7,995. They will think a £2,000 scrappage allowance will be deducted from the advertised price.”

April registrations of new cars totalled 133,475, down 42,193 units on last year. It was the lowest April market since 1991, but 13% above the SMMT forecast of 118,000. Over the first four months, the total was 859,017: a 28.54% dip compared with 2008, representing 245,184 fewer sales. It was the eleventh monthly decline in a row.

Honda, which resumes production at Swindon on June 1 after a four-month shutdown, is clearing unsold stock, said a spokeswoman. Its 16% decline in April was better than the year-to date-performance.

Manufacturers’ monthly performances vary when compared to 2008. Ford is still setting the pace.

Its four month total of 106,994 was 17.43% of the market: in 2008 the 130,120 total was 15.15%. Vauxhall achieved 85,637 registrations (13.95%) against 117,543 (13.68%) last year.

Demand for small, economical and low-CO2 new cars continues to grow. The average new-car CO2 figure is 153.5g/km – 4.5% lower than in 2008 and 15.2% below the 2000 level.

The mini sector was the only one to rise (by 54.3%). Diesel penetration fell for the second time in 2009.

Ford took the top two spots in the year-to-date best sellers list with the Fiesta (41,142 units) and Focus (31,962), but their positions were reversed in April. Vauxhall’s Insignia (12,994 so far this year) is the biggest selling D-sector car.

Top 10 April registrations