Ford and Honda have put a brake on the UK government's £300-million car scrappage scheme, which began yesterday, saying there was no clarity in the policy.
The UK government, in its budget last month, had announced a vehicle scrappage incentive scheme, due to run for nine months, where consumers could trade their vehicles bought before 31 August 1999 for new cars at a rebate of £2,000, with the UK government giving £1,000 and the car manufacturer £1,000. (See: UK auto body wants scrappage scheme to boost new car sales)
But lack of clarity in the scheme such as how VAT will be charged on the discount among other confusions has made Ford and Honda ordering their dealers not to make any sale on the scheme.
Ford and Honda were two of the 38 manufacturers who had signed up to the UK governments car scrappage scheme last month , but both these manufacturers said that they were delaying taking part in the scheme until the UK government gives clarification as to whether car makers and their dealers could share the £1,000-per-car contribution to the scheme.
They also seek clarification on how VAT would be charged on the discount if the contribution were shared and whether VAT would be charged on the full price of a car, prior to the discount being given.
Ford said in a statement that it had temporarily stopped deliveries to its dealers but were committed to the scheme.
The Department for Business, Enterprise and Regulatory Reform (BERR) said in a statement although Ford and Honda have raised a few issues, these would be ironed out soon but added that the £1,000-per-car contribution has to come solely from the car manufacturer.
Although the scheme has generated a fair bit of interest, dealers and car manufacturers are hesitant to go ahead with the often-changed fine print in the scheme, as they feel that if they make a mistake in the accounting, then they may never see their money again.
Dealers are also unhappy that the car manufacturers have asked them to share some part of the £1,000 cost, since they operate on very low profit margins.
A similar scheme introduced in February across Europe was highly successful with Germany recording a 40 per cent increase in new sales registered in March.
But unlike Europe, where the respective governments pay the entire amount for the scheme, the UK government has chosen to ask car manufacturers, who are already reeling under losses, to share half the cost.