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Scrappage scheme reports stall V-shaped car retail sector recovery

Car Scrappage

Almost a third of new car buyers are putting-off their next purchase as they await a Government announcement about a potential car scrappage scheme.

According to research conducted by automotive consumer magazine What Car?, 29% of car buyers have responded to reports of possible incentives of up to £6,000 to help pay for a low-emission new car by stalling their purchase plans.

Rachael Prasher, managing director of What Car? and Haymarket Automotive, said: “Of course, any incentive needs debating and careful consideration, but what’s clear is that the time being used to do this is delaying purchases.

“Like you, I’m sure, I have seen 6 July mentioned as a possible day for the Government to reveal its plans. It can’t come soon enough; certainty one way or the other is looking increasingly important.”

The Financial Times (FT) reported today (June 10) that ministers may be about to scupper hopes of a new car scrappage scheme, however.

The FT said that the plan may be scrapped amid suggestions that it could benefit overseas carmakers at a time when support could be better channelled to support UK-based operations.

What Car? said that initial analysis of website traffic, consumer behaviour, enquiries and anecdotal evidence had suggested that UK car retail was on course for a V-shaped recovery from the COVID-19 lockdown period.

Last week AM gave a taste of the positive reports from across England as showrooms re-opened for business.

But Prasher suggested that uncertainty about a scrappage scheme could hamper that trading success in the medium term.

She said: “According to our data, one major impediment to the industry’s recovery is an apparent lack of government action on a potential stimulus package.

“While the initial bounce since dealerships opened has been welcome, it is clear that clarity here could significantly help to further unlock the market.”

Last week the German government announced that it will double its share of the existing purchase incentive for EVs and hybrids, paying a grant of €6,000 (£5,370) for a pure EV in addition to an OEM-backed subsidy of €3,000 (£2,685).

That announcement came less than a week after France said that it was now poised to increase the state-provided grant towards an EV purchase from 7,000 euros (£6,243) from 6,000 (£5,342).

ICDP managing director, Steve Young, had formulated an OEM-backed plan to offer scrappage incentives without further impacting the Government’s fiscal policy in the recent ‘clean cars for a post-COVID recovery’ report.

He shares Prasher’s concerns about the promise of such a scheme potentially stalling the market and also about the long-term impact of Government support.

Speaking to AM last, Young said: “There is a chance that, right now, some car buyers are holding off a purchase as they feel that incentives are on their way further down the line.”

Government’s first new car scrappage scheme was launched following to boost the car market following the financial crisis.

It cost the taxpayer £400 million and matched £1,000 in funding with £1,000 of car manufacturer backing to give car buyers £2,000 off a new car if they scrapped a model aged 10 years or older.

The ICDP’s proposed scrappage scheme was entirely OEM-backed and Young said: “We have to consider that the debts the Government creates in the wake of COVID-19 will be paid by our children and our grandchildren.”

 

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