The UK government’s scrappage scheme may add just 100,000 units to the UK car market in 2009 according to an analyst at JD Power.
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Arthur Maher, of JD Power Automotive Forecasting, said that the scheme would be unlikely to have the dramatic impact in the UK that it has had in Germany.
“There are two key differences between the German situation and that in Britain,” he said.
“One is that this British scheme – unlike that in Germany – will only be be half financed by government, leaving the dealer or manufacturer to find the GBP1,000 balance. It’s not quite clear what that will mean exactly, but at the bottom end of the market in particular where margins are slim, it could cause difficulties.
“Secondly, the German scheme was backed up by big discounts on prices provided by the manufacturers. In the UK, the pound-euro exchange rate leaves little room for similar activity and indeed, some manufacturers have even tried to increase prices on exchange rate difficulties.”
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By GlobalDataMaher stressed that the scheme should be welcomed as it will certainly encourage some consumers to enter the car market and help to support the industry. But he also cautioned that there will likely be a ‘payback’ when the scheme finishes at the end of March in 2010.
How has JD Power changed its forecast due to the scheme?
“We were forecasting 1.6m new car sales in Britain this year and that has been revised upwards to 1.7m units,” Maher told just-auto.
“Next year is complicated by the ending of the scheme. There may well be a rush in the first quarter ahead of its demise with the annualised running rate possibly getting as high as 1.8m units, but there would be a ‘payback effect’ from those brought forward sales in following quarters.
“For the year 2010 we are currently forecasting a UK car market of 1.65m units.”
While the industry in Britain may generally welcome the government’s scrappage scheme, there is clearly a need for a little perspective. This recession is already much deeper than anyone expected and will take a bit of shifting. In effect, this scheme will prevent further market slippage this year while also providing a platform for a gradual market recovery later in 2010 when the economy should be growing again.
In 2007, the UK car market was 2.4m units. It looks like we will have to wait a few more years before the market gets over 2m units again.
Dave Leggett
See also: UK: Government introduces GBP2,000 car scrappage scheme
