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Industry calls for scrappage scheme extension

The Society of Motor Manufacturers and Traders (SMMT), together with the Retail Motor Industry Federation believe the Government should increase its £300 million contribution to the scrappage scheme.

Since its launch in May, it has been responsible for 215,747 new car orders (as of September 13).

The voluntary discount scheme sees owners of cars or vans over 10-years-old offered £2,000 off the price of a new car: £1,000 each from the Government and manufacturer/dealer.

Business secretary Lord Mandelson has already ruled out an extension after the RMIF called for a meeting to discuss the matter.

The SMMT had initially remaining undecided over whether an extension was the best long term solution for the industry, but has called for an extension in a unified call from the manufacturers.

Paul Everitt, SMMT chief executive, said: “Consumer confidence is still weak and recovery remains extremely fragile. “Avoiding a relapse in demand is critical to the UK economy and an extension to the scrappage incentive scheme, which has already proven its credentials as a cost-effective support mechanism, will ensure a more stable outlook for vehicle demand.”

The SMMT is calling on the Government to extend the scheme through to the original close date of the end of February 2010, to counter the impact of a higher rate of VAT and the introduction of the first year vehicle excise duty rates.

AM’s September 25 issue will feature a special feature from four different dealer council chairman with their views on the extension of scrappage and readers can join in with the discussion on AM’s forum here.

The SMMT has written to the Government and highlighted the following points:

  • Over 100,000 new vehicles have been registered under the scrappage scheme with an order bank of a further 100,000 suggesting the scheme will run out of funding in late October/early November.
  • One fifth of the cars registered were either built in the UK or have an engine produced here.
  • The scrappage scheme is largely self-funding with the 15% VAT paid on a car bought for £7,650 covering the £1,000 Government contribution.
  • SMMT estimates that 70% of the cars bought under the scrappage scheme represent additional sales which would not otherwise have happened in 2009.
  • The average CO2 emissions of a car bought under the scheme are 131.8g/km, 13.5% lower than the pre-scrappage market average of 152.3g/km.
  • The average car scrapped under the scheme is 12.6 years old with estimated CO2 emissions of 181.9g/km – 27.6% higher than its replacement.
  • 76% of cars bought under the scrappage scheme were classified in the mini or supermini segments. 
  • 85% of a vehicle’s lifetime CO2 emissions come through use meaning the scheme is likely to save some 2.7m tonnes of CO2.
  • SMMT now forecasts the new car market to end 2009 at 1.85m units, above pre-scrappage forecasts but well below the 2.47m pre-recession five year average.

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