Car scrappage 'not reaching all the parts'

by Peter Plisner
BBC West Midlands transport correspondent

Component firms in the West Midlands said they have not felt any benefit

The much-publicised government scrappage scheme, where new car buyers get a discount in exchange for scrapping an old vehicle, may not be providing the promised boost to all parts of the UK's motor industry.

While sales of new cars have risen, many automotive manufacturers are still struggling.

The scheme, which has recently been extended, began in May.

Latest figures from the Society of Motor Manufacturers and Traders show across the UK in the last three months more than 200,000 additional vehicles have been sold.

Car maker Hyundai has been the most successful, selling around 26,000 cars under the scheme.

Many components suppliers have been disappointed because the volumes of orders haven't come through Rachel Eade, Accelerate

Car dealers have reported brisk trade and even those who were sceptical about scrappage before it started appear to have changed their view.

Gerald Freeman of Worcester-based Startin Honda said it had been very good for his firm.

"People have bought used cars as well as new ones and I think it's given the whole industry in the UK a bit of a lift," he said.

Many of the additional car buyers who have been tempted by the £2,000 discount for scrapping a vehicle 10 years old or more, have opted to buy smaller cars.

That has not helped Midlands-based car makers Jaguar and Land Rover, which collectively have only sold a few hundred extra vehicles under the scheme.

It is a similar picture at many of the region's hard-pressed components firms.

Sales of additional new cars have risen thanks to the scheme

Although some have seen orders rise because of the additional car sales, others have yet to feel the effect.

Birmingham-based WH Smith and Sons, makes a variety of automotive products for several leading manufacturers.

Managing Director Colin Sarson said: "My understanding of it is that the people who have benefited most have been the low-cost car producers - foreign car imports coming in - which the West Midlands companies in the supply chain really are not going to be supplying components for."

Those who have been keeping a close eye on the impact of the recession agree many parts of the automotive sector have so far not been touched by scrappage.

Rachel Eade of business support agency Accelerate said: "Many components suppliers have been disappointed because the volumes of orders haven't come through.

Colin Sarson's automotive business has not seen the benefits of the scrappage scheme

"Some companies have gone out of business because of that. They just haven't been able to maintain their employment."

Although scrappage has not been as much help as expected, many firms are now much more optimistic that they were a few months ago.

Although the UK is still in recession, new orders are materialising. Interestingly, much of the new activity appears to be driven by the weakness of the pound making UK manufactured goods much more attractive to foreign buyers.

Colin Sarson said: "The competitiveness that we're getting from the current exchange rate is very helpful to everyone in the West Midlands and probably far more so than the scrappage scheme."