Benefits of Lord Mandelson's scrap scheme under fire
18 March 2009

The proposed pay-to-scrap scheme being considered by the government will not help the UK car industry, according to a leading motor industry analyst.

Research by Professor Garel Rhys, of Cardiff University Business School, suggests that the trade-in incentive will do little to bolster UK-based manufacturing as 86 per cent of the cars bought here are imported.

On the continent, where scrapping schemes have already been introduced giving customers trading in their old cars up to €2500 (£2300), the story is very different.

In France 62 per cent of new cars sold are produced in French factories, and in Germany that figure is over 65 per cent.

The impact of the scrappage scheme on the UK market may also be significantly less than in other European countries, which have seen rises of up to 21 per cent, according to Rhys. He said that the benefit of the scheme to the British car industry would be affected by the absence of small, low cost models made in this country.

“We only make two cars that they [the British Public] are likely to buy: the Nissan Micra and the Mini, and these account for 4 per cent of the British market,” Rhys said. “A scrappage scheme would result in the British taxpayer subsidising vehicle factories in other countries.”

Lord Mandelson’s proposed scrapping scheme, thought to be worth around £500m, could be announced in the budget in April, but Rhys believes the real beneficiaries will be the British car dealers. He says they are likely to take advantage of the grants to reduce the discounts currently on offer to help entice sales.

However, Paul Everitt, chief executive of the Society for Motor Manufacturers and Traders, said that the benefits of introducing a pay-to-scrap scheme would be more widespread than simply helping to trade-in a few, older cars.

"Such a scheme would send out a message to all potential car buyers, regardless of whether they have an old car to scrap, that the time is right to be buying a new car," he said.

Meanwhile, yesterday a bill was passed to the United States Congress outlining its own pay-to-scrap scheme, dubbed 'Cash for clunkers'.

The bill aims to reward Americans with up to $5000 (£3600) to buy new, more fuel-efficient vehicle assembled in the US and up to $7500 (£5400) for 100mpg or more plug-in hybrids. Customers buying cars built outside of the country will only receive a maximum of $4000 (£2900).

Is is estimate that up to 60 per cent of vehicles in the United States are old enough to qualify for the proposed scheme.

George Barrow

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