Car industry in secret talks with Government over £1.5bn scrappage scheme

Wednesday, 3rd June 2020, 3:15 pm
Updated Wednesday, 3rd June 2020, 3:15 pm

Leaders of the UK’s car industry have been in secret discussions with the Government about a car scrappage scheme to help revive vehicle sales.

According to the Guardian, which has seen a letter sent to the Government by the Society of Motor Manufacturers and Traders (SMMT), the SMMT wants government backing for a £1.5 billion scrappage scheme to encourage drivers to swap older models for brand new cars.

The UK industry has been devastated by the coronavirus crisis, with new car registrations down 97 per cent and car manufacturing down 99.7 per cent. The SMMT has previously campaigned for dealerships to be allowed to reopen in order to begin their recovery but the letter from SMMT chief executive Mike Hawes seen by the Guardian says that a major incentive programme such as a scrappage scheme would jump start an “otherwise moribund” market.

Under the scheme proposed in the letter drivers scrapping an old vehicle would be offered £2,500 off the price of a new car, which it is estimated would put 600,000 new vehicles on the road.

While previous calls for a scrappage scheme have been aimed at increasing the number of low-emission vehicles such as hybrid and electric cars, the SMMT proposal is for a market-wide offer covering all types of cars, including traditional diesel and petrol models.

It claims that the scheme could still “support wider government ambitions in terms of climate change and improved air quality” but emphasises that it should support the entire market rather than “disproportionately favouring specific segments or technologies” - a thinly veiled reference to alternatively fuelled vehicles (AFVs) such as EVs.

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The Government wants to end the sale of all CO2-emitting vehicles by 2035 but AFVs accounted for less than eight per cent of all new registrations in 2019 and the SMMT has said that the transition will rely on a gradual move, featuring hybrid vehicles and government incentives.

Senior figures from Ford, Vauxhall and Jaguar Land Rover have also publicly voiced support for a government-backed incentive scheme.

The SMMT, which previously warned that showroom closures were costing the Treasury £61 million a day in lost tax and furlough funding, says that a scrappage scheme could return £3 for every £1 spent thanks to income from VAT and car tax, plus savings made by removing car industry staff from the furlough scheme and avoiding redundancies.

Many car dealers in England have reported being exceptionally busy since they were allowed to reopen on June 1 but Hawes told the Guardian that once this pent-up demand eases there would be bigger questions for the industry and it “may need to work with government to identify ways of boosting demand”.