According to an analysis by consulting firm Deloitte, the global automotive industry is expected to benefit directly from an injection of around US$50 billion in economic stimulus funds, but it says more help is needed to lift consumer confidence and get the industry working more normally again. It also added its weight to calls for a scrappage incentive in the UK.
Deloitte also points out that US$50bn is a small percentage of the estimated US$3.6 trillion in economic stimulus packages committed by various governments around the world.
“What the automotive industry most needs is to have customers buy again,” says Hans Roehm, global managing partner with Deloitte’s Global Manufacturing Industry Group. “The government stimulus efforts so far are helpful, but more is required to really boost consumer confidence and drive them back into the showrooms to buy cars. That’s when we will see a real turning point for the industry.”
“The mix of the direct assistance to automakers and other incentives to spur demand in the market has been a lifeline to industry survival,” says Michelle Collins, automotive industry leader for the Deloitte member firm in the United States. “However, incentives to increase demand must go hand in hand with measures to increase consumer confidence and to make credit more free flowing to finance consumer purchases and dealer inventory plans.”
The Deloitte’s Global Manufacturing Industry Group’s analysis shows that in markets like China, Italy, France and Germany, consumers are being encouraged to replace their older model vehicles with new ones.
Mike Woodward, Automotive Partner in Deloitte’s UK Manufacturing practice, said: “There has been a lot of discussion around whether a scrappage allowance might soon be introduced in the UK. It has certainly worked well in both France and Germany. New car sales in Germany spiked 22 percent last month, bolstered partly due to the €2,500 subsidy for people who turn in their old car and buy a new one. Based on this evidence it would seem that a similar scheme could also have a beneficial affect in the UK and get car sales rising again.”
