New car buying incentive scheme ready – but may not be needed

A draft plan for an incentive scheme to stimulate the UK car market has been drawn up and is ready to put to Government, but only if it is required, Society of Motor Manufacturers and Traders (SMMT) chief executive Mike Hawes has revealed.

Talking after revealing that car production in the UK is down 42.8% in the first six months of 2020, Hawes revealed that far from certain that any such scheme will be considered: while new car registrations fell 44% year-on-year in March, 97% in April, 89% in May and 35% in June they are widely tipped to be up for July, with official figures set to be revealed next week.

The surge in purchasing is attributed to the unlocking of pent-up demand during lockdown, with July being the first full month that dealerships in Scotland, Wales and Northern Ireland were able to follow English outlets and open.

Private lease renewals and Motability sales are reported to have been particularly strong, while Autocar also has anecdotal evidence from sources who prefer not to be named that around one-fifth of buyers are spending more than they previously budgeted as a result of saving during lockdown.

“There are positive signs, and we’ll see the final figures next month, but of course it is a long way from showing that the market has recovered,” said Hawes. “What I believe Government rightly wants to see before taking any decisions is the true picture; we’ve had a freezing of the market, now we have an unlocking – but the really crucial period will be up to the plate change in September and then into the fourth quarter.”

While Hawes declined to reveal specifics of the draft plan – highlighting concerns that hopes of any scheme could stall any recovery of sales – he revealed that it would not take the form of the previous scrappage scheme, when older cars were taken off the road in exchange for a £2000 incentive half funded by Government and half by the car maker.

“Whatever form the scheme takes, it has to support the UK car industry and UK jobs, and we are a country that mainly produces larger, more premium vehicles,” said Hawes. “The last scheme was very positive, but it did focus on the smaller end of the market where the money made more of a difference to the buyers.”

That comment raises the prospect of a percentage discount being applied to purchases, although Hawes would not be drawn to comment. Asked how the public might react to subsidising higher-end car purchases, Hawes added: “Any scheme will be about protecting jobs, and we believe what we have will achieve that.”

Hawes did, however, outline that a solely electric vehicle focused scheme was unlikely, as it would have a minimal impact on helping the industry. “The UK manufacturers a limited amount of electric cars or car parts, and allocations of these cars around the world are limited and to a very large degree pre-ordered, especially since France and Germany have already set out their stall in that area,” he said.

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