The UK Governments car scrappage scheme came to a sputtering halt this week, only moments after its launch on the 18th of May. The scheme, intended to help boost the UK automotive industry during the current downturn, provides new car buyers with a discount of £2000 if they are scrapping their old car, which must be over ten years old.
The £2000 discount is funded by £1000 from central government funds and a further £1000 from automobile makers. However, Ford, Fiat and Honda have delayed starting the scheme to confusion over how VAT is to be applied.
The manufacturers have said that they are still committed to the scheme but that they need to resolve these issues before moving forward with the offer.
The Automobile Association president, Edmund King, said that it was ludicrous that these issues had not already been resolved. He went on to say that there is a lot of interest in the scheme and if confusion over VAT resulted in a fall in sales then the industry would have shot itself in the foot.
Critics of the scheme have said that the £300 million set aside to support the discounts was not generous enough and that the scheme would do nothing to encourage people to buy energy efficient, low emission cars.
New UK car sales were reportedly down by 28.5% in the first four months of 2009 compared with the same period during 2008.
Although there have been a reported flood of enquiries, since the announcement of the scheme in the Budget, these have not yet turned into sales. A lot of people had been putting off their car-buying decisions due to the current economic climate but the scrappage scheme is just not enough of an incentive. Many are looking at alternatives such as car leasing.
Some are saying that the car scrappage scheme is not doing enough for small businesses since to qualify for the scheme the scrapped vehicle must be either a car or a light commercial vehicle not exceeding 3,500 kg in weight. Rather than buy replacement vehicles, many businesses are considering attractive van leasing contracts that provide them with the vehicles their business needs at fixed, known monthly costs.
Friends of the Earth have said that the car scrappage scheme was ‘a lost opportunity’ to cut emissions as the UK scheme doesn’t prevent motorists from part exchanging small engine vehicles for brand new gas guzzlers.
In Germany their own car scrappage scheme has been hailed as a success, helping to stimulate new car sales. However some have reported that the scheme hasn’t really helped the German car manufacturers as demand has been primarily for smaller, compact vehicles and the primary German auto manufacturers, BMW and Audi, produce mainly high end, premium vehicles.
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