The Society of Motor Manufacturers and Traders (SMMT) in the UK has stressed the need for an urgent scrappage scheme to breathe life back into the car market.
Paul Everitt, the chief executive of the SMMT, said, ''It is vital that car buyers are given the confidence to buy now and a scrappage incentive scheme is a clear signal which has already proved successful in other EU member states. The UK government must align with Europe and take immediate action to protect its automotive sector.''
Everitt's comments come in the week that BMW laid off 850 works at its Mini plant in Oxfordshire.
A number of European Union member states already have car-scrapping programme in place. Scrappage schemes recently introduced in France and Germany are estimated to generate between 200,000 and 400,000 replacement vehicles.
In Germany, drivers who trade in cars that are more than nine years old will receive €2,500 (£2,200), while motorists in France receive €1,000. Spain has also recently introduced a similar scheme and the car industry expects hundreds of thousands of new cars to be be bought as a replacement for the scrapped vehicles.
In January, the UK government announced that it was considering introducing a 'scrappage' incentive scheme for motorists, designed to help stimulate the ailing car market and accelerate the transition to less-polluting vehicles.
Business secretary Peter Mandelson said that in addition to providing the car industry with low-interest loans to help fund the development of low-carbon vehicles, the government was looking at schemes to help drive demand for such vehicles during the recession.
"Last week, we committed to guarantees and loans that should help the UK's vital automotive sector draw down more than £2 billion in investment...in its vital transition to low-carbon vehicles," he said. "We are also working to find ways to help the finance arm of the car sector keep providing the credit that keeps the industry moving. I am also looking at other countries' experience with scrappage schemes," he said.
SMMT data shows that about 61,404 cars were produced in the UK in January 2009, down by 58.7 per cent compared to January 2008. Out of this only 10,132 cars were for the domestic market - a decline of 72.3 per cent - while the rest were for exports. Commercial vehicle production at 8,351 registered a 59.9-per cent fall from January 2008.
A proposal detailing a scrappage scheme for the UK was submitted by the SMMT to Lord Mandelson's Department for Business earlier this month. The scheme proposed allowing cars and vans more than nine years old to be scrapped in return for a £2,000 cash incentive towards a new or nearly new vehicle.
Meanwhile, car manufacturers, the opposition Conservative party and the automobile association have urged the government to help the motor industry after figures showed car production slumped again last month.
Unless the government chalked out some urgent measures, the car manufacturers face closure or a cut in production, union leaders warned.
Dismal sales data for January
SMMT data shows that about 61,404 cars were produced in the UK in January 2009, down by 58.7 per cent compared with January 2008. Domestic car production fell 72.3 per cent to 10,132 vehicles. Commercial vehicle production totalled 8,351 units - a 59.9 per cent fall on January 2008.
However, the export market reveals good numbers. Out of the cars made last month, exports accounted for a record 83.5 per cent.
Many UK car manufacturers had cut jobs, gave extended Christmas holidays, or reduced workers' hours.
Ford is to offer voluntary retirement for up to 850 UK workers, while Bentley announced three-day week in October and longer Christmas break. It is also closing Crewe plant for seven weeks from March, and has announced 220 job losses and 10 per cent pay cut. GM (Vauxhall) extended Christmas closure and 40-day shutdown. Honda announced four-month shutdown between February and May. Jaguar Land Rover go for a series of one-day shutdowns and production cuts plus 1,000 redundancies.
Mini announced Christmas shutdown extended by 10 days. It also allowed 300 agency staff go and one week shutdown for February. From March, plant will have a five-day week, and a further 850 jobs will be cut. Nissan says 1,200 redundancies, and one shift on each line stopped until April 2009.
The data shows grim situation across the industry. However, Mandelson declined to comment, and urged people to 'stop feeding the rumours'.
Czech European Union affairs minister Alexandr Vondra called on the commission earlier to come forward with proposals for a Europe-wide scrapping programme to boost consumer demand for new cars.
The European car industry currently employs 12 million people – six per cent of all jobs in the EU. Mr Verheugen said EU car production was shrinking rapidly, with 2 million cars waiting for customers at the moment in Europe.
Environmentalists, however, are likely to be lukewarm about the scheme unless the incentives are structured to ensure motorists do upgrade to genuinely lower-carbon vehicles and that net carbon gains are delivered by scrapping older vehicles.