Mandelson - 100,000 more cars & vans

The UK Government has announced it is to extend its Car Scrappage Scheme beyond the original £300m allocation that was initially set aside.

Speaking today at the Labour conference in Brighton, business secretary Lord Mandelson said that the scheme, which is running out of money, would be extended to cover approximately 100,000 more cars and vans.

The scheme was on course to use up its cash allocation way ahead of the February 2010 end date, which was set at the outset of the scheme. However, Mandelson has given the industry a renewed boost with this announcement, commenting: “There are encouraging signs that the economy is picking up. But recovery remains fragile and uncertain, especially in manufacturing and one of its cornerstones, the car industry.”

Unions and Labour MPs have been urging ministers to extend the scheme to help save manufacturing jobs amid concerns car sales would fall sharply without continued incentives to boost demand. Derek Simpson, General Secretary of Unite told the conference that extending the scheme would help Labour “reconnect” with working people. 

A recent letter to Alistair Darling, signed by the EEF, UK Steel, the Manufacturing Technologies Association and British Plastics Federation, warned of the “clear risks” of ending the scheme, noting that demand for new cars could not be maintained without the incentives currently in place.

The 5bn-euro German scheme, the largest of any government, ran out early this month. It encouraged almost two million motorists to scrap their old cars in exchange for new ones.

The US version spent its $3bn allocation in a matter of weeks. The UK, US and German governments have spent a total of €8bn ($11.4bn; £7bn) on similar scrappage schemes.

The EEF has recently issued a letter to the Chancellor Alistair Darling claiming the Car Scrappage Scheme had helped reduce the fall in UK car production while retaining skilled jobs. Director of policy, Steve Radley confirmed; “The success of the Car Scrappage Scheme has been clear for all to see by putting a floor under manufacturing recession and helping retain skilled employees.”

However, a caveat was also included – as the EEF stated it was uncertain consumers would continue with their demand for new cars if such scrappage incentives were to cease. It further added; “It is by no means certain that this positive trend will continue in the near future with consumer confidence still fragile and unemployment still rising. Failure to extend the (Car Scrappage) scheme before a stronger recovery is in place runs the risk of pulling the rug from under the sector, damaging supply chains and prospects for a better balanced economy in the upturn.”

As recently reported by the Car Scrappage Team, the Society of Motor Manufacturers and Traders (SMMT) has also called on the Government to extend the scrappage scheme. The SMMT was quoted last month as stating the £300m scheme fund was likely to run out by the end of October and has therefore called on the Government for an extension to February 2010. But a more startlingly estimation has been offered Deloitte, which claims the scrappage scheme fund could be all-but-gone within the next week.

Mandelson - No Promises

“If the scheme ends in October and is followed by a 2% increase in VAT in January it will be a serious blow to the British car industry that’s just getting back on its feet.” warns Paul Everitt, CEO – SMMT.

Executives from the motor industry met with Business Secretary Lord Mandelson last week and called for an extension to the Car Scrappage Scheme by increasing the Government provided subsidy by a further £200m. The initial Government sum which kick started the Scrappage Scheme in May was £300m and is forecast to run out in October.

The industry is warning that failure to provide further subsidy may result in workforces being forced back on to shorter working weeks with job security at risk.

Paul Everitt, Chief Executive of the Society of Motor Manufacturers and Traders (SMMT) was quoted to have said “Without an extension there’s a real risk of an abrupt slump in sales that will create further uncertainty for thousands of car workers with the likelihood of short-time working.”

A Department of Business spokesman confirmed a meeting was to take place, but said there were no plans to extend the Car Scrappage Scheme.

Since the Car Scrappage Scheme was launched in April 2009 around 200,000 new cars have been bought, which has helped to sustain employment within and connected to the motor industry.

Answer Back

Following our previous Car Scrappage article concerning the Times Online claims that manufacturers and dealerships are offering higher interest rate loans for some Scrappage Scheme deals, together with Parkers’ opinion that buyers would be better off avoiding the Scrappage Scheme altogether, the Car Scrappage Team decided to look further into these comments. And we weren’t impressed.

We specifically assessed the Times Online claims regarding Toyota’s Scrappage deal for the Avensis, and after speaking directly to Toyota it became clear the Times hadn’t done their homework. Furthermore, both the Times Online and Parkers’ failed to acknowledge several important factors including the benefits to the consumer regarding a ‘no-deposit’ Scrappage Scheme deal together with the many and varying offers across individual models rather than one ‘blanket’ Scrappage deal. Their analysis was anything but in-depth and generally misrepresented the manufacturer’s and dealerships. So we decided to put the story straight and clear up any potential confusion by publishing our own article. To read the full story click here.

Michael Valvo, the Press Relations Manager for Toyota has kindly provided the following official statement regarding the Times Online and Parkers claims and statements; -

“Toyota provides a range of competitive offers for all customers including those taking advantage of the Scrappage scheme. Different offers are sometimes available to different customers and there can be different terms and conditions but we are always open and fair about what offers are available and to whom, and consistently and clearly communicate the terms of our offers throughout all advertising. In relation to Scrappage specifically BERR are aware of and have approved our approach. ”

Michael Valvo
Press Relations Manager
Toyota GB / Lexus GB
Burgh Heath
Epsom KT18 5UX

The Car Scrappage Team have no affiliation with any manufacturer or dealership, however inaccurate claims and poorly researched statements by third parties need to be addressed so potential buyers are not mislead. The Car Scrappage Scheme is a brave strategy to keep the UK motor industry alive and running during one of the worst economic periods since 1930’s. The Scrappage Scheme financial assistance provided by the UK Government is far less than that being provided by the US and European Governments for similar initiatives. On that basis and in our opinion, manufacturers and dealerships are designing flexible and affordable deals for potential buyers through the Car Scrappage Scheme in very challenging trading conditions.

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The Society of Motor Manufacturers and Traders (SMMT) have revealed UK car sales for May 2009 plunging 24.8% to 134,858 compared to May ‘08. Furthermore, this is the 13th consecutive monthly decline in new UK car sales. Since the 1st January 2009, UK vehicle sales have totalled 748,691, which is down 27.9% year on year.

Top of the Premiership - Fiesta Zetec

The Ford Fiesta notched up the highest sales figures in May of 7,040, closely followed by her big brother – the Ford Focus with 6,693.

The Car Scrappage Team will be analysing May’s sales figures in further detail tomorrow. We think you’ll find it makes interesting reading.

Paul Everitt, chief executive of the SMMT was quick to remind the industry that the month of June will most likely show the true and full picture regards new car sales, as the Car Scrappage Scheme only officially commenced on 18th May ‘09. And Everitt continued by saying “We have seen an encouraging start to the scrappage incentive scheme with 35,000 orders being placed since it was announced, although it will take time to feed into registration figures”.

The Car Scrappage Team was one of the first media sources to report certain manufacturers and UK dealerships setting up their own scrappage schemes prior the official commencement. Moreover, some continue to demonstrate their entrepreneurial skills and fighting spirit by creating their own, highly incentivised initiatives, which are over and above the Government’s scheme.

Full Premiership sales, stats and analysis tomorrow.

Any motorist failing to do so will need to provide evidence that they lived in both addresses, or else run the risk of being denied the total £2,000 subsidy. Last year a police study found that around three percent of cars on the road were registered to the wrong address.

And now uSwitch, a price comparison website, has found that those people who do participate in the scheme will find the benefit of the subsidy wiped out within 88 days due to the rapid rate of depreciation on new vehicles. New cars will on average drop in value by some 49 percent in their first year.

Furthermore, motorists should brace themselves for a hike in the cost of their insurance policy due to the increased value of their new car versus their old vehicle.

The industry however still had high hopes that the Car Scrappage Scheme will kick start demand for cars in Britain, much as it has done in Germany following the introduction of a similar scheme earlier this year.

The Society of Motor Manufacturers and Traders have reported a sharp rise in potential buyers, whilst Sue Robinson, Director of the Retail Motor Industry Federation said that dealers had reported a “marked increase in enquiries since the scheme was announced in the Budget in April.”

The Department of Business Enterprise and Regulatory Reform (BERR) stated that cars will be dealt with as ordinary end-of-life vehicles through the manufacturers. The BERR also confirmed that the scheme’s main objective was to boost the car industry’s production and sales and therefore the scrappage industry together with the environmental benefits were of secondary importance.

Ian Hetherington Director General of the British Metal Recycling Association is of the opinion that the Government have failed to address their concerns that only 30 per cent of all Approved Treatment Facilities (AFTs) are being made accessible through the “end of life vehicle” regulations. Furthermore, the UK scrap industry is of the opinion that the Government has failed to clarify details of the car scrappage scheme including the scrappage and collection rules. The scheme begins on 18 May 2009 with the UK consumer also unclear as to the final details.

Ford forecasts that it will gain 20% of the car scrappage scheme market. The manufacturer has 130 ATFs and 20 collection points across the UK, which they believe is sufficient in accommodating the increased scrap volume once the scheme commences next week.

Cartakeback.com are the dismantling contractor to Ford and Manager Graham Price stated that car manufacturers are using their own contracted ATFs as these providers guarantee the 85% recycling compliance rate. Car manufacturers have the facility to ensure that this 85% recycling rate is being achieved by only nominating specific ATFs. A good percentage of the Government ATFs are yet to report their target achievements to the BERR, thereby making themselves less attractive to car manufacturers.

The latest Car Scrappage Scheme Survey has revealed some intriguing statistics. 70% of those surveyed are eyeing deals offered by dealerships by looking to trade in their old motor. It could be a summer of activity in the showrooms.

Potential punters appear to be looking at deals amongst the lower market brands, such as the Ford Ka. And always one for a deal, our UK consumer is finding that the scrappage scheme discount of £2,000 is a larger percentage of the overall purchase price for an economical car compared to the higher market models, therefore offering better value.

Furthermore, punters may also be finding that car loans for smaller sums are easier to secure with lenders.

Hyundai is reporting that enquiries are up 400% at its dealerships since the scheme was announced, whilst Ford say that its car scrappage scheme section went live on its website, as many visits were received as to its most popular page within just a few days.

Similarly, Toyota are reporting ‘major increases in traffic’ to its website, Audi have noted significant interest in the scrappage scheme area of its website and Peugeot dealers are getting 60 to 80 more enquiries as well as a ‘massive increase’ in website traffic since the scheme was announced.

Nissan are seeing more visits to its dealerships since the Budget announcement although many of the visitors we trying to find the cheapest car possible. If this is the trend through the industry, it points towards the likelihood that stimulus will not be to the whole of the industry, but rather skewed towards the cheaper end of the market.

It is widely expected that May 18 is the date from which the scheme will commence, with an official announcement expected imminently.