UK Vehicle Scrappage Scheme: Will It Help the Market Meltdown?

OXFORD, England - June 6, 2009: As the car market stabilizes at -15% across Europe, while the UK stubbornly hovers close to -30%, all eyes are on the factors which may be making a difference. Many pin their hopes on Fleet Renewal Incentives, which all major EU markets have adopted through introducing older vehicle scrapping incentives.

Given the importance of the motor business to tax revenues —estimated at €360bn a year from vehicle taxes in the EU alone — it’s no surprise that they did. A collapse in car sales hurts governments as well as component suppliers, car makers and dealers and, although they’ve been introduced under a ‘green’ banner, most have only one goal: increase sales volume, and through that, cash flow into the supply chain.

But, do they work? They were tried before during the 1990's, to speed the switchover to catalytic converters and unleaded fuel, and produced mixed results. However, recent experience in France and Germany shows they can be very effective - if they have the right mix of factors. Conversely, if the scheme is poorly structured - like the Spanish one which is being hastily re-vamped - they are just expensive failures.

The jury is still out on the UK Vehicle Scrapping Scheme but our research suggests that it the incentive may be too small to fund the switch from buying a younger used car to buying a new car and the private consumer's current aversion to taking on more personal debt, even if he or she could find it!

This latest white paper from Les Glassock of Les Glassock & Associates identifies the main factors that ensure a scheme's success, drawn after comparing the schemes from Germany, France, Italy and Spain, and assesses if they are adequately represented in the current UK scheme.

The full paper can be viewed and downloaded free from www.lga-consultants.com.