Scrappage incentive runs its course

The Government's scrappage scheme, which offered a £2,000 incentive for the owners of older cars and light vans to trade them in for a newer model, has come to an end after 10 months.

Hailed by Business Secretary Lord Mandelson as having delivered "the results we aimed for", industry figures show that the scheme has accounted for 20.4% of all new registrations since its introduction in mid-May 2009. This represents sales close to the 400,000 vehicle limit that was set for the scheme - increased from an initial 300,000 ceiling.

Lord Mandelson said that the incentive had been a success "not just for manufacturers, but for the whole industry and its supply chain," adding that the figures showed that it gave "vital support, boosting demand when the industry needed it most".

And it has been praised by the motor industry as having been an important shot in the arm for flagging sales, though the green credentials of the scheme - centred on claims that older cars would be replaced by more fuel-efficient models - were contested by environmental campaigners.

Speaking earlier this month, Society of Motor Manufacturers and Traders (SMMT) chief executive Paul Everitt hailed the "eight consecutive months of growth in the car market" - something he said was generated by scrappage. He added that the impetus of the scheme would continue to be felt after it came to a close.

While private buyers led the growth in February, business car demand was also said to be strengthening.

Government research suggests that 56% of those taking up the initiative would not have otherwise bought a new car at the time, but while car sales have been bolstered by scrappage, owners of light commercial vehicles have been less enthusiastic.

Vehicles eligible for the scheme included cars or small vans registered before the end of August 1999, but a subsequent change in criteria allowed vans of at least eight-years-old to qualify.

By the end of 2009, although overall scrappage registrations stood at virtually 290,000, fewer than 4,500 of this number were vans.

An SMMT spokesperson told More Than Business News that light commercial vehicles (LCVs) are predominantly used as business tools, meaning that older vehicles are often still actively used - and that many owners would not necessarily be in a position to afford a new one.

"Most LCV owners may also be on a contract hire deal that runs for three-years - so it can't really be compared to the car market because there are different needs," she added.

Overall, the demand for vans fell by 35.6% over the course of 2009, with just 186,386 examples sold, according to the SMMT.

Speaking earlier this month as February sales figures for commercial vehicles were released, Paul Everitt acknowledged that while demand for new vans had picked up recently - in contrast to poor truck sales - he did not "expect a consistent recovery for some time, either for new vans or trucks".

Meanwhile, a National Audit Office report published last week noted that the scrappage initiative involved long-term losses of £18 million. Despite Lord Mandelson being warned initially of potential losses of some £55 million, it said, he made the decision to press on - using the logic that sales made during a recession were more important than those once the recovery was underway.

IMAGE: John Stillwell/PA Wire

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