labels: Cars, World economy
UK government's car scrappage scheme a hit news
29 May 2009

While the UK government had only reluctantly agreed to unveil the new car scrappage scheme last month on the assumption that it would fail, it has now hailed the scheme as a success since 35,000 extra vehicles have been bought through this scheme within two weeks of its launch.

Not only is the government taking the credit for the success of the scheme, Prime Minister Gordon Brown and business secretary Lord Mandelson are now urging consumers to opt for new vehicles under this scheme sonner rather than later, before it runs out.

The Society of Motor Manufacturers and Traders (SMMT) had presented this scheme to the government in early February, (See: UK auto body wants scrappage scheme to boost new car sales) but the Gordon Brown government only opted to introduce it in April, that too under great pressure from the car manufacturers and SMMT, said one commentator.

This delay has seen job losses and plant closures at a time when job losses in the UK have been mounting due to the recession. The scheme to help boost auto sales in the, had already demonstrated its effectiveness in Germany, France and Spain where it had been launched much earlier, a fact the SMMT and the UK media had been pressing the government to consider.

The UK government, in its budget last month, had announced the vehicle scrappage incentive scheme, which would start on 18 May, enabling consumers to trade their vehicles bought before 31 August 1999 for new cars at a rebate of 2,000, of which the UK government would give half and the manufacturer the other half.

The scheme is designed to run until March 2010 or until all the funds allocated for the scheme are used up.

Even while bringing out the scheme, the reluctance of the government was apparent, when it asked the car manufacturers to pay half the subsidy.

In Germany, drivers who trade in cars that are more than nine years old receive 2,500 (2,200), while motorists in France receive 1,000. Spain also introduced a similar scheme and the car industry expects hundreds of thousands of new cars to be bought as a replacement for the scrapped vehicle.

The UK government has put in a total of 300 million in the car scrappage scheme compared to nearly 5 billion by the German government where in March the German auto sales soared 40 percent from the same month a year earlier, after one month of launching the scheme.

This was the same case when, the government unveiled the 2.3 billion aid package to the UK car industry in February, (See: Britain unveils 2.3-billion loan for car industry)  which fell far short of the 13 billion the UK car industry was seeking. (See: UK's 2.3 billion auto aid inadequate)

This was despite the fact that last month new car sales in the UK continued to decline for the 11th consecutive month, and registered the lowest April sales in the last 18 years.

The SMMT had warned in February that the overall new car market in the UK is likely to fall to 1.72 million units this year, from 2.13 million in 2008 and 2.4 million in 2007.

The plight of the UK car industry was highlighted last month, when one of the main auto industry events in Europe, the British International Motor Show was cancelled.

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UK government's car scrappage scheme a hit