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Dealers back calls for scrappage scheme extension

The Society of Motor Manufacturers and Traders (SMMT), together with the Retail Motor Industry Federation (RMIF) 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.

The SMMT was initially undecided over whether an extension was the best long-term solution, but has now called for it in a unified move 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 closing date of the end of February 2010.
It hopes to counter the impact of a higher rate of VAT and the
introduction of the first year vehicle excise duty rates.
AM asked four dealer council chairmen: should the scrappage scheme be extended?

Keith Kingham, managing director of Kinghams in Croydon

“It definitely should be extended. But the problem we have is we can’t get hold of any cars to sell through it. Daihatsu is not exporting from Japan at the moment because of problems with the yen.

“We also have a SsangYong franchise and 60% of our sales have been through scrappage. I’m positive the scheme will be extended and if it’s not, I’m very worried about what’s going to happen to sales across the industry.”
David Manchester, managing director of Charters Peugeot

“I don’t see what else is going to drive the market. September looks like it could be up by 14%, but as soon as the scrappage scheme comes to an end the market will return to negative numbers.”

Peugeot dealers have been asking for an extension of the scheme since July. 

“It’s got to be a no brainer for the Government because the cost of the scheme is offset from the VAT it is earning back from sales. The big question mark for me is how much of the £300 million has been taken up by the administration costs. 

“The Government says the money is being used for 300,000 registrations vehicles, but it’s not going to because a lot will be used up by administration.”

John Miskin, owner of Sportif Citroën

“I’m concerned how the media could feed a rush of scrappage sales by highlighting the fact the scheme is coming to an early end. Transaction prices have gone up and there is a severe danger if the media get hold of this fact and, despite cars being as cheap as they have ever been, manufacturers could be painted in a bad light.

“The scrappage scheme should be phased out slowly, with the contribution reducing gradually from £2,000 to £1,400 and finally to £500. This has been mooted in other countries. The difference being in Europe, governments contributed all the money. 

If the UK government gradually reduced its contribution would the manufacturers make up the
short-fall?”

Steve Burrows, managing director of Pentagon Toyota

“The introduction of scrappage has proved a huge success with 200,000 orders already placed. 

With an expected 65% of these being incremental purchases this has already given 130,000 extra registrations. It came at a time when the auto industry was down 28% year-on-year. 

“However, it is still a fragile position. An extension to scrappage, which has already happened in Europe and the USA, would be welcomed and should ideally continue until we begin to see a sustained recovery in the economy. 

“Towards the end of Q2 2010 to coincide with the election would be the best result for all parties.

“With the current economy, scrappage needs to be extended to maintain new car sales and benefit the rest of the economy, which is contributed to by car sales. 

“It will help footfall, staff retention and help retain jobs in other sectors associated with the automotive industry.” 

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