Mixed response greets car-scrapping bonus

By John Reed
Published: April 23 2009 03:00

The car industry won its bid for a £2,000-per-car scrapping bonus yesterday, with the cost to be split between government and carmakers themselves.
Manufacturers welcomed the scheme, but said they were still studying how it would be implemented, while environmental watchdog groups criticised its failure to encourage consumers to buy cleaner cars.
The £300m programme will apply to buyers trading in vehicles 10 years or older. Government said it would take effect from next month, and last through March 2010 or until the funding had been used up. Similar trade-in schemes introduced in Germany, Italy, France and other countries over the past year have breathed new life into car markets. In January, Germany introduced a €2,500 (£2,200) bonus for cars nine years or older, attracting over half a million buyers into dealerships.
Carmakers and motor retail groups welcomed the plan, though some raised questions over government's requirement that they foot half the bill. "£1,000 is great, but it would have been nice to go the whole hog, considering that's what worked in Germany," said Tony Whitehorn, managing director of Hyundai Motor UK.
The Department of Business, Enterprise and Regulatory Reform is due to meet with manufacturers next week to discuss implemention of the scheme. "A large part of this programme falls on the car manufacturers," said Paul Ormond of Honda, whose plant in Swindon is in the midst of a four-month temporary shutdown. "We've got to study the implications of that."
The Society of Motor Manufacturers and Traders estimated that about 9.5m cars and 1m vans would be eligible for the scheme. "We need to see people coming back to showrooms, we need demand to move, and we think owners of the 11m vehicles that will qualify will find the incentives very attractive," said Paul Everitt, chief executive of the SMMT.
Because funds for the scheme are capped at £300m - enough for 300,000 cars - government may face pressure to top up the programme later. Responding to strong demand, Germany this month expanded funding for its scrappage scheme from €1.5bn to €5bn.
Like Germany's scheme, Britain's sets no emissions criteria, which brought accusations of "greenwashing". The Campaign for Better Transport yesterday claimed the scheme would "subsidise gas-guzzlers".
But industry officials say lower-priced vehicles - which tend to be smaller and have lower emissions - are likeliest to benefit from trade-ins by drivers of older cars, who tend to be less affluent.
The government acknowledged that the scheme would have only "a neutral or modestly positive environmental impact".
Copyright The Financial Times Limited 2009