UK car scrappage scheme boosts auto industry news
20 June 2009

Britain's beleaguered car industry could be in for a revival as its first signs became apparent last month though production fell once again. The 43 per cent drop in production in May was the smallest fall in 2009 and several manufacturers buoyed by brightening prospects have taken on workers or added shifts.

The government's scrappage scheme that allows motorists to trade in their old cars in return for a £2,000 subsidy for a new one appears to have achieved its objective of boosting demand. Around 60,000 motorists have already traded in their old under the scheme. (See: Decline in UK car production slows

Nissan, which allowed 1,200 employees to go at the start of the year, has recently taken on 250 temporary staff. New hiring has also been reported by Mini at Cowley.

Toyota has scrapped plans for introducing a four day week in August and September and an extra shift has been started at Jaguar Land Rover at its Solihull plant.

At Honda, too production has resumed after a lengthy shutdown at its plant in Swindon. A spokesman said the company was delighted to have cars rolling off the production line once again.

There are indications also in the huge stockpile of unsold cars that is getting reduced as sales pick up and reflect the impact of the government's scrappage programme.

According to the Society of Motor Manufacturers and Traders (SMMT), chief executive, Paul Everitt, prompt action by manufacturers has been painful but necessary and a direct link now exists between demand in the marketplace and production volumes.

He added that the scrappage schemes implemented across Europe were beginning to produce a positive impact, although it would take a little longer for the full benefits to flow down to companies at all levels in the supply chain.

The latest figures reveal that about 60,000 cars have been bought after the introduction of of the government's £300 million scrappage scheme, which was intended to spur demand by giving a £2,000 subsidy for anyone who traded in a 10-year-old vehicle for a new model.
However, some analysts point out that it was not clear whether the scrappage scheme was helping the British auto industry which provides more than 80,000 jobs.

They say that since the scheme was introduced there has been an upsurge in the car sales, but this has been restricted to largely smaller vehicles at the lower-end of the price spectrum. The scheme is therefore not impacting the automotive industry as a whole. A very limited number of UK manufacturers are deriving any benefit from the scheme they add.

According to some analysts schemes introduced in Europe are more important to the British auto makers as the vast majority of cars built in Britain are exported to mainland Europe. The bulk of cars sold in Britain are built abroad, which means that the scheme will benefit foreign carmakers more than domestic industry, they say.

Analysts point out that the figures that would be released by SMMT next month would provide a more reliable guide to the impact of the governement's scrappage scheme.

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UK car scrappage scheme boosts auto industry