Government-led introduction of new scrappage schemes in Europe would “inevitably” lead to automakers actually experiencing a worse production environment when they finish, says a leading industry think tank.

Addressing delegates at just-auto’s inaugural Intelligence Seminar at the UK’s National Motorcycle Museum yesterday (11 October), LMC Automotive managing director, Pete Kelly, highlighted how Spain was mulling re-introducing a form of scrappage as its domestic industry suffers a catastrophic sales drop, but that this was by no means a pan-European panacea.

“On the one hand, you have quite severe austerity plans by governments and when you are firing public sector workers and reducing benefits, it is difficult to justify scrappage schemes,” he said.

“Vehicle manufacturers themselves [are] saying this is no longer the way to do things. From that [scrappage] inevitably leads to a period afterwards which is even worse when the incentive is withdrawn.”

Kelly noted how despite various European scrappage schemes undoubtedly helping in 2009, they also had the unintended consequence of equally aiding counties such as South Korea who did “brilliantly” from the incentives.

“The case is still there, but it is harder to make,” he said. “There is a very small [scrappage] scheme going to be started in Spain, which will get people thinking.”

The LMC managing director said Spain’s performance was “catastrophic,” noting that at 750,000 units, the country was producing half the volume compared to before the crisis hit.

“We are not expecting Spain to recover before the end of this decade,” he said.