Will scrappage 2.0 help to jump start sales?

We examine the effectiveness of new schemes a decade on from when scrappage was first introduced by the Government.

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In a challenging year for new car sales, a number of manufacturers have introduced scrappage schemes to incentivise customers back into the showrooms.                 

A decade ago and 2009 had not started well for the UK motor industry. In the fallout from the 2008 global financial crisis, manufacturers and retailers alike braced themselves for a dire period as consumers held onto their money, uncertain of how and when the economy would recover.

In response to a record fall in car sales and the potential for mass business failures, lobbying by the Society of Motor Manufacturers and Traders (SMMT) on behalf of UK car manufacturers resulted in the Government’s launch of the UK’s first vehicle scrappage scheme, announced in the Budget on 22 April 2009 by the-then Chancellor of the Exchequer, Alistair Darling.

Following similar schemes previously introduced in Germany, France and Italy, the objective of the scrappage scheme was to encourage motorists to purchase a new, more environmentally-friendly car or van and scrap an older, more polluting one that they’d owned for more than twelve months. By the summer of 2009, it was clear that the scheme had been a success with applications peaking at 50,000 in June alone. The consumer appetite and positive political capital gave rise to an extension of the scheme, enough to fund another 100,000 new cars.

Whilst scrappage benefited certain manufacturers more than others, a total of 392,227 cars were sold through the scheme, which finally ended in March 2010. According to one senior manufacturer executive: “Scrappage was good for us but it also dramatically changed the shape of the UK car park and got people into cleaner, safer cars. Without it, many hundreds of dealers, as well as component suppliers would have gone into liquidation.”

At the time, SMMT Chief Executive Paul Everitt said: “The scrappage scheme provided people with permission to spend. Despite the financial turmoil, there hadn’t been massive job losses and people were either too embarrassed or frightened to spend their money as it seemed reckless. Scrappage gave them a reason to buy a new car.”

Fast forward ten years and the industry finds itself in similar waters, though for different reasons, which we have explored in other industry articles. Although there is no tax-payer funded scheme from the Government this time round, a number of manufacturers have chosen to use this formula again as a means of tempting customers into making the switch into a brand new car.

Eight manufacturers to date, including Vauxhall, Mazda, Hyundai, MG, Toyota, Kia, Renault and Ford have launched their own versions of scrappage schemes, offering discounts off new cars and also vans, the majority of which will run until the end of September 2019.

Mazda’s Upgrade Plan, for example, offers up to a £6,000 saving off the cost of a new car when trading in an older vehicle. The maximum discount applies to any new Mazda car which produces less than 144g/km of CO2 emissions.

Vauxhall is offering the second-highest scrappage scheme discount of up to £5,650. The deal applies to vehicles over seven years old and only if you scrap your old car with Drive and upgrade to a brand new car with Vauxhall Finance.

Ford has become the latest car maker to is offer both car and commercial vehicle buyers the chance to benefit from a £2,000 scrappage scheme discount on selected models until the end of September 2019.  Andy Barratt, managing director, Ford of Britain, said: “Our last scrappage scheme saw 25,500 customers trade-in older vehicles for Ford models equipped with our latest emissions and fuel-efficiency technologies, so we expect our new Ford scheme to also have a positive impact on the environment.”

 

It remains to be seen how the latest incarnation of scrappage will impact on sales performance for this year but back in the day of the single August plate change, demand usually dropped off between September and November. Since the March and September registration plate change which started 20 years ago in 1999, monthly sales have tended to balance out more evenly. The March plate change is perhaps the most important one because it involves a clear change of designator. Buyers can always be sure that a 19-plate is a 2019 car so consequently, the Spring month is now the busiest for registrations.

As car dealers continually look at new incentives to stimulate consumer demand, their industry partners such as Autoglym are also looking at ensuring they provide dealers with a compelling added value proposition that offers clear customer benefits.  Autoglym’s LifeShine Vehicle Protection System (VPS) has proven to deliver the most profitable VPS solution for dealers with independent research showing increased penetration rates of 8.6% on average.

To find out how LifeShine can generate incremental revenue for your dealership, please get in touch.

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