Britain launches car scrapping plan to boost sales of new vehicles

The chief executive of the Society of Motor Manufacturers and Traders, says the plan "has already started to get people back into showrooms."

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May 19, 2009 10:34
2 minute read.

 
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Britain on Monday began offering cash incentives to buyers of new cars who scrap their old model, a program which has already proved very popular in other parts of Europe as a way to help the struggling auto sector. The government and car manufacturers are sharing the cost of giving a discount of £2,000 to motorists who scrap an old car or van - a "banger" in British slang - when buying a new one. The old car must be roadworthy, have been registered before August 21, 1999, and weigh less than 3.5 metric tons. The new car most likewise be less than 3.5 tons. Cars ordered since April 23 were eligible and some dealers were promoting the discount even before Monday's official launch. The so-called "bangers for cash" program will continue until February 28 next year, or until the £300 million allocated by the government run out. The launch of the plan, however, immediately hit a pothole as dealers complained that the government wasn't clear about taxing the new cars - whether to apply a 15 percent tax before or after the £2,000 rebate. The government said the tax must be applied before the discount, and said the problem was between manufacturers and dealers about whether dealers should share in the cost. The Society of Motor Manufacturers and Traders, which had campaigned for the scrapping plan, said the tax issue had delayed deliveries of some cars. "There is a lot of consumer interest in this scheme and, if this confusion over (tax) leads to a lack of sales, the industry will have shot itself in the foot," said Edmund King, president of the Automobile Association. Paul Everitt, chief executive of the Society of Motor Manufacturers and Traders, nevertheless said the plan "has already started to get people back into showrooms." "There has been a good response to the scheme ahead of the official start date and industry is confident that this will be translated into additional orders," Everitt said. In addition to stimulating car sales, which have slumped 25% since last year, the program is intended to reduce pollution by getting older, less fuel-efficient cars off the roads. Adrian Tink of RAC, a motoring services company, said the amount of money available and the 10-year rule will limit the impact of the program. "You've also got to ask what's in it for those on lower incomes who maybe can't afford a brand new car," said Tink. "We're hopeful though that some motorists will see it as an opportunity to invest in a safer, greener vehicle." High-volume manufacturers including Ford and General Motors signed up for the program. The 38 participants also include Bentley, Rolls Royce and London Taxis International.

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