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Glass's Appeals For Scrappage Scheme to Continue

Tue, 04 Aug 2009
Glass’s is calling on the Government to extend its Scrappage Scheme
(that has already resulted in 144,000 new car orders) at least until
next summer in order to avoid a very significant fall in new car sales
and a consequent collapse in revenues for car manufacturers and retailers.

With Scrappage Scheme registrations currently running at around 13,500
per week, it is estimated that the Government’s allotted funding could
run out as early as October 2009, well in advance of the very earliest
forecasted rise in consumer confidence. The immediate outcome, says
Glass’s, would be to plunge new car orders to levels seen in the fourth
quarter of 2008, with little prospect of an improvement until well into
2010.

Glass’s points to several factors that will combine to further depress
consumer demand after the current Scheme ceases. In particular, it
highlights the return in January of the 17.5 per cent rate of VAT,
coupled with growing public awareness of rises in new car list prices
amounting to around 7 per cent on average so far this year – made
necessary by the falling value of the pound against the euro. Consumers
may well baulk at the higher prices, it suggests, delaying any recovery
still further.

“The Government should urgently re-evaluate the planned discontinuation
of the Scrappage Scheme in order to avoid a sudden, pronounced and
damaging fall in business,” comments Adrian Rushmore, Managing Editor at
GlassGuide.co.uk. “Consumer confidence will continue to be at a low ebb
at least until next summer, and without the contribution of Scrappage
sales, the new car market will rapidly fall to the levels seen during
the last recession, when around 1.6 million cars were sold each year.”

Rushmore says the profitability of scrappage sales for dealers and
manufacturers should not be underestimated. “Retail sales generated
through the Scheme often provide a better margin of profit than sales to
corporate fleets. Its absence would, therefore, be felt in two ways: a
loss of sales, and a loss of the most profitable sales.”

Glass’s says dealers throughout the UK want the duration of the Scheme
to be extended, and the definition of what constitutes a 10-year-old car
to be broadened to cover those vehicles registered on or before 28
February 2000 (V-plate). The company says there is a strong case for
the Scheme to apply to vehicles that have no MOT, provided they meet the
age criteria. To maximise the benefit, many dealers are also calling
for the VAT increase to be deferred until later in 2010.

“A continuation of the Scheme can be a win-win for all parties,” adds
Rushmore. “The Government’s existing contribution of £300 million is
being offset by the additional VAT revenues accrued, so extending the
scheme need not hit the public purse. Meanwhile, the new car market
would gain vital support until the beginning of a wider economic
recovery, rather than being returned to the perilous position of late
2008.

“For dealers and manufacturers alike, it is an opportunity to move out
of a loss-making situation, with the knowledge that virtually all the
Scrappage business is being done with customers who would not otherwise
have considered a new car purchase. Unlike other scrappage schemes
operating across Europe, there is little or no prospect of our scheme
‘pulling forward’ new business, only to suffer an immediate decline
when it is withdrawn, and the used car market will be similarly
unaffected.”

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