Scrappage extension

Posted on 9 Feb 2010 by The Manufacturer

The Government's decision to extend its popular car scrappage scheme is good news, but the car industry will still need further market support.

The extension is designed to ensure all the allocated funding for the scheme is utilised. With £70m still unspent from the Government’s half of the fund – enough for another 70,000 vehicles – the scheme will now run to 31 March or until the money runs out.

The scheme, under which buyers of new vehicles are eligible for a £2,000 discount if they trade in a model that is 10 years old or more, was expected to conclude at the end of this month.

January’s new car registration figures, released last week, showed a climb back to the numbers enjoyed two and three years ago. The total of 145,000 is an increase of 33,000 registrations compared to the same period last year. The scrappage scheme has been estimated to be largely responsible for this upturn.

David Raistrick, UK Manufacturing Leader at Deloitte, says that while the january registration figures and the extension of the scrappage scheme are both positive outcomes for the industry, he predicts that continued success in the sector will rely on an improvement in the corporate car market.

“For the industry to balance the decrease in private sales as scrappage ends, the corporate car market must grow,” says Raistrick. “Looking at total registration figures over the past two years, the number of corporate cars has decreased from 58% to 49%, while private demand has grown thanks to scrappage. If, as UK businesses pull out of recession, corporate and fleet registrations increase this will help take this figure closer to the long term average of 60% of total sales. This could help boost total annual numbers to the upper end of the forecasted registration figure of 1.8-1.9 million.”