Page last updated at 14:33 GMT, Monday, 6 July 2009 15:33 UK

Scrappage scheme helps car orders

Registration plates being put on a new car
The fall in sales was the smallest since July 2008

The UK's car scrappage scheme has started to have a "positive impact" on the industry as new car sales fell at their slowest rate for almost a year.

New car registrations fell by 15.7% in June compared with the same month last year, smaller than May's 25% drop.

The Society of Motor Manufacturers and Traders (SMMT) said 176,264 units were sold during the month.

The scrappage scheme, which offers a £2,000 incentive to scrap old cars, accounted for about 10% of sales.

The scheme came into effect on 18 May.

Private buyer registrations were up 3.9% year-on-year, the first rise in this sector since November 2007.

Extension calls

Under the scheme, car buyers are given a £2,000 discount on a new car if they scrap one that is at least 10 years old. Half of the money will be paid by the government and half by the car industry.

The SMMT said 29,796 vehicles had been sold under the scrappage scheme since its start, while government figures show that, up to 21 June, some 87,000 orders had been placed.

BMW - 160
Fiat - 1,743
Ford - 2,066
Honda - 813
Hyundai - 3,042
Kia - 1,321
Nissan - 1,662
Peugeot - 715
Suzuki - 916
Toyota - 2,586
Source: SMMT

The Department for Business, Innovation and Skills says that at this rate, the scheme would be exhausted by the end of October. It had first forecast that it would last until March.

Industry experts and scrapyard dealers have called for the government to follow Germany's lead and extend the scheme. The German government extended a similar scrappage scheme, introduced earlier in the year, to the end of 2009.

"We don't want to get back to the situation where the car market is dying again because we are not removing the scrap cars," said Paul Cowan from Devizes Reclamation Company.

"I feel that the government should be looking at actually extending the scheme within the UK."

But the business department is "adamant" that there are no plans to extend it.

'Steady progress'

"We are beginning to see the positive impact of the scrappage scheme translate into new vehicle registrations," said Paul Everitt, chief executive of the SMMT.

"SMMT expects the pace of improvement to increase in the coming months, but we can already see the industry making steady progress on the long road to recovery."

Although June was the 14th month in a row to see sales of new cars fall, it was the smallest monthly decline since July 2008.

The number of new cars sold in the UK in June was about 15% more than the 153,000 figure predicted by the SMMT in April.

And demand for small cars picked up - with the "mini" segment showing 145.4% growth over the year and "superminis" taking a record 37.2% share of the market.

Car being scrapped
The scrappage customer doesn't tend to have as much brand loyalty or any snobbery
Tony Whitehorn, Hyundai UK

However, the total number of cars sold in the first six months of the year is still 25.9% down on the first half of 2008.


According to Ian Robertson, BMW's group marketing director, the crisis that has hit the motor industry appears to be over.

"From the first quarter of the year to the second quarter of the year, there was a stabilisation of a negative trend," he said.

BMW has introduced cheaper entry models for both its BMW and Mini brands in order to benefit from the government's scrappage scheme.

"We've seen an improvement in sales," he said, adding that the 1.5 millionth Mini has just rolled off the production line at its factory in Cowley, near Oxford.

However, Mr Robertson said the government had missed an opportunity by its failure to link the scheme to car emissions.

"They could have added a CO2 target, which would have prevented some of the cheap and cheerful cars, which aren't necessarily that environmentally friendly, from qualifying," he said.

'Less snobbery'

Hyundai also reported that UK sales had almost doubled in June from the same month a year ago - which it said was largely due to the scrappage scheme.

1. Ford Fiesta
2. Ford Focus
3. Vauxhall Corsa
4. Vauxhall Astra
5. Peugeot 207
6. Mini
7. Volkswagen Golf
8. Ford Mondeo
9. Vauxhall Insignia
10. BMW 3 Series
Source: SMMT

UK managing director Tony Whitehorn said that "scrappage customers" were generally buying small cars, that were often their first new vehicle.

"They're looking for a good return on their money, and things like a five-year warranty are important to them as well as having modern vehicles," he said.

"The scrappage customer doesn't tend to have as much brand loyalty or any snobbery. They're coming to it fresh and are doing plenty of research before they decide what to buy."

However, Professor David Bailey, director of Coventry University Business School, said that while the car industry may have bottomed out, it wouldn't properly start to recover until wider confidence and the housing market picks up.

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