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Scrappage funding could run out by end of October

The Government’s £300 million budget for the scrappage scheme could run out before the end of October as more than half the money allocated has already gone.

Orders were at 185,273 units as of August 23 and the September plate change is expected to fuel a further push.

Under the scheme, manufacturers have to match the Government’s contribution of £1,000 for each vehicle registered and many have already expressed concern that the funding would run out.

Jeremy Thomson, managing director for Mazda UK, said it would be “irrational” not to extend the scrappage scheme and Ford has also called for an extension.

Hyundai is leading the scrappage scheme orders with more than 18,000 so far and it is expecting its dealer network to secure 30,000 orders before the scheme finishes.

Tom Barnard, spokesman for Hyundai UK, said: “There’s no sign of orders slowing down.

"The plate change should mean the next few weeks will be crazy for us. August used to be the registration change month 10 years ago, so a lot of people will be due an MoT on their old cars and getting big bills.

"We think this will push them to choose a new car through the scrappage scheme instead.”

Hyundai is predicting that the Government’s cash will run out in mid-October.

Barnard said: “We would welcome an extension to the scheme. Our dealers have worked hard to reap the benefits, with amazing success.

"But we know the scheme will come to an end and we can adapt back to life without scrappage just as easily as we adapted to life with it.”

He added the scheme had vastly improved Hyundai’s brand recognition and the dealer network would reap the benefits in the future when cars are brought back to it for servicing, as well as word of mouth recommendations to friends and family.

South Korea’s Kia has also been doing well out of scrappage, but Steve Kitson, communications director for Kia UK, warned there could be a double whammy of pain for dealers towards the end of this year.

He said: “As well as the expected end of scrappage, there is also anxiety that the 15% VAT rate will go higher than the 17.5% it was before it was temporarily lowered by the Government.

"We’re not optimistic the scrappage scheme will be extended, although we would like it to be.

“We’d also like to see an extension of the lower VAT rate of 15%.”

Kia believes that when scrappage ends and VAT is returned to its original level, the move will be interpreted by consumers that manufacturers are increasing prices. 

Kitson said: “Cars that could have been bought through the scrappage scheme are going to go from costing £4,000 to £6,000 and, with the increase in VAT, the rise will be even more.

“We want the Chancellor to at least examine the possibility of extending the scheme.”

The Society of Motor Manufacturers and Traders (SMMT) said it hasn’t yet decided if extending the scrappage scheme was the best course of action for the long-term health of the automotive industry.

The SMMT agreed with predictions that scrappage orders would run out before the end of October.

A spokeswoman said: “We’re still assessing what the best solution would be.

“We believe access to funds through the Automotive Assistance Programme is what manufacturers need in the long term.”

Sue Robinson, director of the Retail Motor Industry Federation (RMIF), said the popularity of the scrappage scheme indicated that there is still demand which may not be met before the remaining £150 million in Government funding runs out.

The RMIF's National Franchised Dealer Association (NFDA) has called for a meeting with the Government to talk about the possibility of extending the scheme.

Dealer view

A Hyundai dealer that voted on AM’s online poll said: “Of course it should be extended.

“It’s the only thing turning the market and without it we’re going to see something like a 30% drop in sales.”

John Miskin, owner of Sportif Citroën and also the French brand’s dealer council chairman, said: “Scrappage is actually easing off for us because of the holiday season, but it has worked really well and it’s been very popular with light commercial vehicle customers, not just with superminis.

“LCV customers tend to hang on to their vans for a lot longer and the scrappage scheme has enticed business customers into showrooms.”

Miskin said the general consensus from Citroën dealers was that scrappage funds would run out before the end of October.

Not all dealers are in favour of an extension and it’s a point of great debate within the industry.

A dealer principal at a Peugeot dealership said: “It has served its purpose and, although it has created a boost to those dealers among us that have a good range of small cars, they are all manufactured outside of the UK so the benefit has only been at the retail and logistic end.

"The scrapping of cars that are still in good order is an unacceptable waste of a resource.” 

 

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