Scrappage boosts car sales

Posted on 6 Nov 2009 by The Manufacturer

New car registrations experienced the year’s biggest monthly increase in October, due in part to the success of the Government’s scrappage scheme.

Figures from the Society of Motor Manufacturers and Traders (SMMT) have revealed a 31.6% rise in new car sales with a total of 168,942 registered during the month.

“October has seen this year’s biggest monthly increase in registrations with the successful scrappage scheme accounting for over 20% of them,” said Paul Everitt, SMMT chief executive. “We have seen additional demand created by the extension of the scheme and customers wanting to avoid the VAT increase planned for January. Encouragingly, there has also been an increase in demand in the fleet and business sectors, which will be critical in sustaining recovery next year.”

October is the fourth month of growth sustained by the scrappage incentive scheme with private demand experiencing a sizeable October rise of 86%. The scheme, which gives drivers £2,000 towards purchasing a new car when trading a car more than 10 years old, is due to end in March next year.

While the October figures are encouraging, total new car registrations have fallen 12.3% compared to the same time last year. David Raistrick, UK Manufacturing Leader at Deloitte, says there are a number of challenges that lay ahead for the automotive sector. “While the industry celebrates this good news,” he says, “there is a ‘perfect storm’ on the horizon where the automotive sector will be affected by a combination of factors that could come into play in Q1 next year.

“Within a short period of time we will see the scrappage scheme end and the VAT rate return to 17.5%. Meanwhile the government’s proposed show room tax of £950 per vehicle could be implemented in March and interest rates may also increase in this period. Furthermore, car manufacturers may find themselves needing to implement price rises due to the low value of sterling increasing the cost of imported cars and parts.”