Scrappage pot half empty

Posted on 11 Aug 2009 by The Manufacturer

Around 155,000 new cars have been ordered through government’s scrappage incentive scheme, meaning half the funds for the programme have now been used up.

The scheme works by government and car manufacturers contributing £1,000 each for a £2,000 discount on the list price of a new car when the customer scraps a vehicle over 10 years old at the same time. Government allocated £300m for the programme, half of which has now been used.

People have been taking government up on the offer up and down the country, with official figures showing a pretty evenly distributed share of sales including scrappage discount. The biggest share has been taken by consumers in the south east though, with 18 per cent.

In addition, government says the new cars purchased emit on average 25 per cent less carbon emissions than the ones being scrapped. This is an estimate though because the data for emissions is not always available for all older cars.

Delivering the update, Business Secretary Lord Mandelson, who is currently filling in as top dog while Gordon Brown takes his jollies, said: “I’m pleased that we have already achieved over 150,000 new car orders. This is a great deal for manufacturers and dealers, not to mention the customers.

“The scheme has contributed to the 13.5% jump in car manufacturing and the first growth in new car registrations since April 2008.”

Manufacturers and dealers are waiting to see whether government will now extend the scheme following its initial success. It is due to run until March next year or when the funds run out, whichever is sooner. If demand through the programme is sustained at its current level, the pot will run dry by October.

Many analysts have pointed out that, from government’s point of view, the scheme technically pays for itself as the VAT government recoups on the cars it is suggesting would not have otherwise been sold will in most cases exceed the £1,000 it is chipping in.