Currently reading: Analysis: What a scrappage scheme would mean for the car industry
SMMT has a proposal to incentivise consumer demand but government might not implement it

A draft proposal for a new sales incentive scheme has been agreed between all manufacturers and retailers, Society of Motor Manufacturers and Traders CEO Mike Hawes has revealed, but it remains uncertain if it will be put to the government, let alone implemented.

Until now, Hawes and the wider car industry have been reluctant to openly discuss any incentive scheme, concerned it could cause would-be buyers to pause their purchases. But even then, weekly polling of more than 6000 visitors to Autocar sibling brand What Car?’s website has consistently revealed around a third were waiting in expectation of one.

While some have reported that the government has ruled out a scheme, the Department for Business, Energy and Industrial Strategy has been careful to leave the door ajar, stating: “We have no current plans to change the existing incentives or to introduce a scrappage scheme.”

Hawes declined to go into details of the draft proposals, but he made clear that there’s no chance of them being reviewed until the end of September at the earliest. “It’s a huge month for the industry, and the government quite rightly wants to know what level demand truly is at,” he said during the inaugural Autocar Business Live webinar last week. “Even then, the truer economic picture isn’t likely to become clear until the fourth quarter [of 2020]. So if anyone wants a new car, I wouldn’t be waiting in hope. Having a proposal ready and agreed is just good practice; it doesn’t mean it will be required.”

That view was echoed by James Brierley, CEO of Inchcape, the sixth-largest car retailing group in the UK. “Sales have been strong in the past month and the pipeline looks good,” he said. “This is a market dominated by lease renewals, which come around regardless of the pandemic, and it’s clear from our sales data that some buyers are actually willing to spend more, having saved during lockdown. “Used car sales are also strong, and while fleets are holding off renewals, that could be seen as another reason to be positive for the future.

“If you ask me if the car industry deserves support, then the answer is emphatically yes. The income car sales and maintenance work generates for the country is self-evident. If the industry needs help, then there’s no question that it should be given. But for now, I remain very positive about the opportunities ahead for at least the next six months.”

Car factory

Back to top

Data from What Car?’s mystery shopping team, which establishes and guarantees a Target Price for anyone buying a car through, reveals a similar, if fluctuating, story depending on what type of car is being bought. Certainly in some sectors, discounts are higher than they have been for years, driven by manufacturers’ eagerness to turn excess stock into cash.

Were the arrival of an incentive scheme to coincide with excess stock being cleared (something one brand told us on condition of anonymity should be possible for most by September) and factories still running at reduced rates, it’s anticipated that a large proportion of any scrappage saving would be absorbed by reduced discounts anyway.

The ‘will-they-won’t-they’ issue of whether an incentive will be required is also clouded by the July registration figures that are due to be published on Wednesday. These are widely tipped to be positive, potentially even showing a year-on-year rise, reflecting pent-up demand from lockdown being satisfied.

After a succession of appalling year-on-year sales figures (-44% in March, -97% in April, -89% in May and -35% in June), this news would be greeted with jubilation – but also extreme caution. “Nobody has a crystal ball and nobody knows what the future holds for the economy,” said Hawes. “July is looking strong, and that’s great. August is traditionally a very small month, so it’s likely to look alright again. September and beyond will be the critical moment to ascertain what kind of initiative, if at all, is needed to retain jobs.”

While Hawes wouldn’t elaborate on the nature of the SMMT’s draft proposal, he did make clear that it doesn’t follow the example of 2009’s scrappage scheme, whereby people who had for more than a year owned a car that was at least a decade old could have it crushed in exchange for £2000 off a new car, half-funded by the government and the manufacturer. In total, 400,000 cars were scrapped, and the details of some still make enthusiasts weep today.

“The scheme was very effective in stimulating the market, but the main beneficiaries were companies that sold small cars, and that didn’t directly reflect where the major employment was in the British car industry, which tends towards larger and more premium vehicles. The proposal we have, if required, will help UK-based manufacturing and all retailers,” said Hawes.

Back to top

However, it wouldn’t be focused solely on promoting electrified cars – an area the successful French and German schemes have exploited. “Supplies of those cars were limited before those incentives were introduced, and the available allocations have been largely taken up as a result,” said Hawes. “We have the Nissan Leaf and the Mini Electric being produced in the UK, but such a scheme wouldn’t protect jobs in the wider industry.”

Mini electric splash

The latter point is also critical to how the industry and government would go about tackling criticism for supporting a scheme to sell more cars for an industry with a poor reputation following the Dieselgate scandal. Subsidising sales of a premium, possibly diesel, SUV may otherwise seem to be in poor taste, even if the tax income from the transaction meant the sale was at a net benefit to the Treasury.

“To date, we’ve heard of more than 11,000 jobs being cut across the automotive sector out of around 860,000,” said Hawes, prior to retailing groups Inchcape and Pendragon announcing that they will add at least 10% to that total. “We expect many more to come when the job retention scheme ends, and it’s our priority, along with the government’s, to protect all we can.

“Following the 2009 crisis, every plant in the UK secured major investment from its owners. The workforce had proved that it was efficient and delivered great value. There’s a huge amount of talent in our retail, supplier and aftermarket sectors too. That hasn’t changed and, whether we have an incentive scheme or not, keeping those skills in the industry is paramount.”


One in six UK automotive jobs under threat, says SMMT 

UK plant closures to cost car industry £8.2bn 

Aston Martin to cut 500 jobs due to reduced sports car production

Join the debate

Add a comment…
Electricvanman 5 August 2020

If car companies can offer

If car companies can offer dealer incentives to increase sales or offer discounts on fleet sales or to car brokers then use this to fund the scrappage deals they all want. Wait till January when the WTO 10% increase comes into force that will hit the market even more.

jason_recliner 4 August 2020

The Scheme must be Targeted

It should only apply to cars made in the UK.  =

405line 3 August 2020

Mixed messages

It might be time to scrap the motoring industry because although I pay my motoring taxation the local and national control cars and where and when you can use them so I suggest that the local and national governments get together and work out what they want to do with regards to vehicles, because I ain't buying any vehicles after the one I currently own and I don't expect to support people who are. I don't owe the car industry anything or see why they are special and need to be perpetuated and specially supported when the vibes I get from local and national seem to be telling me otherwise.