The Society of Motor Manufacturers and Traders has written to business secretary Lord Mandelson urging government to extend the successful scrappage incentive scheme which has helped boost consumer spending and secure UK jobs in the motor industry.
After 15 months of consecutive decline in the new car market, the scrappage incentive scheme has reignited demand, resulting in year-on-year growth in July and August and a dramatic cut in the rate of decline in vehicle production.
“Consumer confidence is still weak and recovery remains extremely fragile,” said SMMT chief executive Paul Everitt. “Avoiding a relapse in demand is critical to the UK economy and an extension to the scrappage incentive scheme, which has already proven its credentials as a cost-effective support mechanism, will ensure a more stable outlook for vehicle demand.”
SMMT is calling on government to extend the Scrappage Incentive Scheme through to the original close date of the end of February 2010, to counter the likely negative impacts of a return to the higher rate of VAT and the introduction of the first year VED rates.
The facts…
· Over 100,000 new vehicles have been registered under the scrappage scheme with an order bank of a further 100,000 suggesting the scheme will run out of funding in late October/early November.
· One fifth of the cars registered were either built in the UK or have an engine produced here.
· The scrappage scheme is largely self-funding with the 15% VAT paid on a car bought for £7,650 covering the £1,000 government contribution.
· SMMT estimates that 70% of the cars bought under the scrappage scheme represent additional sales which would not otherwise have happened in 2009.
· The average CO2 emissions of a car bought under the scheme are 131.8g/km, 13.5% lower than the pre-scrappage market average of 152.3g/km.
· The average car scrapped under the scheme is 12.6 years old with estimated CO2 emissions of 181.9g/km – 27.6% higher than its replacement.
· 76% of cars bought under the scrappage scheme were classified in the Mini or Supermini segments.
· 85% of a vehicle’s lifetime CO2 emissions come through use meaning the scheme is likely to save some 2.7m tonnes of CO2.
· Pre-1999 vehicles will have a Euro 2 engine as standard compared to Euro 4 in new vehicles. These engines deliver more than a 50% improvement for harmful emissions.1
· Compared to ten year old vehicles, new cars now have higher EuroNCAP ratings, more safety technology as standard and improved security features.
· SMMT now forecasts the new car market to end 2009 at 1.85m units, above pre-scrappage forecasts but well below the 2.47m pre-recession five year average.
The impact on the UK motor industry…
· Ford, whose engine plants in Bridgend and Dagenham employ 4,000 people, has introduced extra shifts triggered by the increase in demand from UK and European scrappage schemes. August output was up 36.5% at Dagenham and 18.3% at Bridgend, compared to 2008. Ford estimates that this has resulted in a positive knock-on effect for around 100,000 of their UK jobs in the sales, distribution and supply chain.
· Nissan has said that production of the UK-built Micra and Note has increased by an additional 33,000 units due to scrappage schemes operating in the UK and across Europe.
· In August and September, Toyota cancelled workshare to fulfil orders incentivised by the UK and European scrappage schemes. Toyota plans to return to the workshare arrangements in October.
