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Car industry feels strain as Government scrappage scheme ends

Monday 8th March 2010

By Mike Jones

February saw a 26.4% rise in the new car sales to 68,686 units with the scrappage scheme accounting for 19.6% of the total rise in the month's new car market.

This growth was led mainly by private buyers. Nevertheless, according to KPMG, the automotive industry is feeling the strain now as the scrappage scheme comes to a close this month. It's evident that the scrappage scheme has thrown a lifeline to the automotive industry - over the past year it has generated growth almost every month in the new car market.

The Government's scrappage scheme has helped the auto industry through a reduction in demand and industry destocking, and has bought time for the industry, allowing it to adjust to a new world where new car sales are a third down from their peak and are likely to remain around this for some time.

If the impact of scrappage scheme is removed, then the underlying outlook is for no more than a gradual recovery at best. The automotive industry should brace itself for more bumps in the road when the car scrappage scheme ends this month.

But the blow may be softened as the industry introduces its own "swappage scheme" - as announced by Vauxhall, Toyota, Hyundai and Nissan among others who are funding super-discount schemes themselves. It has never been a better time to trade in an old banger and this now looks set to continue as the manufacturers try and trump each other with the most eye-catching offers.

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