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Industry remains sceptical about scrappage proposal
Page 52
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The vehicle scrappage scheme unveiled in the recent Budget seems like a good idea to stimulate the UK motor industry in the UK. Will it work?
Words: Christopher Walton IN THE Budget last month, Chancellor Alistair Darling (pictured below) tried to stimulate the sale of new vehicles by introducing a scrappage scheme, based on a successful model already in use in Germany.
Under the rules of scheme, if you want to buy a new vehicle and you have a car or light commercial vehicle up to 3.5 tonnes that is 10 or more years old, you will be eligible for a £2,000 incentive, provided you decide to scrap the vehicle and buy a brand new one.
The fine print
To further support the scheme, which will be formally launched in mid-May, the Department for Business, Enterprise & Regulatory Reform has set aside a £300m war chest to part-finance the £2,000 sums for all those interested in scrapping their vehicles But, like many other schemes, read the fine print and you'll discover things are a little more complicated. The £2,000 incentive is made up of £1,000 provided by the government and has to be matched by funding from the industry. The scheme will also run until March 2010, or until the government funding is used up — which would require 300,000 old vehicles traded in for new models in the next 10 months. There's also no requirement for the new vehicle to be 'green' — even Bentley has signed up.
Lord Mandelson, the UK's business secretary, says:"This is targeted action with a capped budget and for a limited time, designed to boost the motor trade. This will ensure the benefits of a scrappage scheme are balanced with the needs of other sectors of the industry, such as the second-hand market, maintenance and repair businesses, and other industries that produce consumer durables." But not everyone is convinced. Des Evans,chief executive of MAN UK, is urging the government to take into account the role heavier vehicles play in the motor trade. He wants to see a £10,000 scrappage incentive for eight-year-old tractor units.
Step up the pressure
Evans tells CM: "We must step up the pressure. Each 44-tonne artic returns £25,000 per annum in tax, but the average artic only makes £2,500 in profit if they're good.
"Half a per cent of the vehicle population, ie vehicles that are over 28 tonnes, contribute 20% of all fuel tax.
"My proposal is a 5% VAT increase.. This would raise circa £18bn, while a scrappage incentive scheme of £10,000 per eight-yearold tractor at 40,000 units would equal just £400m." Evans would also like to see the government introduce a 10p per litre fuel rebate for tractor unit operators using Euro-3 compliant machinery and above in order to give, sales of trucks with greater environmental credentials a shot in the arm.
Dealers are also sceptical about the success the scrappage scheme might bring.
Alex Wright, commercial vehicle director at Manheirn Auctions, says the scheme will have only a minimal effect on his particular field, because only 2.5% of vans that roll through the auction halls are 10 years old or more.
He says: "Someone who has a 10-year-old van has one for a reason — their economics are such that they have a lack of cash flow, and they would be an unlikely candidate to go out and buy a new one anyway."