U.K. consumers will get subsidies of as much as 2,000 pounds ($2,930) to trade in old cars for new models after the government followed other European countries in offering the incentive to stem job losses.
The “scrappage” plan, announced by Chancellor of the Exchequer Alistair Darling today in his annual budget presentation, will be implemented next month and will end in March 2010. The measure will apply to cars more than 10 years old, he said.
The plan comes six months after the British auto industry first called for assistance to boost demand. The measure will help carmakers including Ford Motor Co., the U.K.’s best-selling brand, garner more sales amid the recession.
The measure adds to the 2.3 billion pounds of loan guarantees the government has pledged to assist the auto industry. Darling is seeking to stoke demand for cars to encourage consumer spending and stem rising unemployment as automakers trim production to match slumping sales.
U.K. auto sales have declined for 11 consecutive months and in the first quarter dropped by more than 200,000, or 30 percent, to 480,358 vehicles, the Society of Motor Manufacturers & Traders said April 6. The industry employs 180,000 workers in manufacturing at plants run by carmakers including Nissan Motor Co. and Bayerische Motoren Werke AG.
The U.K. government has lagged behind counterparts in mainland Europe in introducing payments for car purchases. In Germany, where drivers can get 2,500 euros ($3,240) for trading in cars that are at least nine years old, registrations soared 40 percent in March. France and Italy have similar programs.
Industry Necessity
“In terms of short-term demand, we absolutely need it,” Paul Everitt, chief executive officer of the SMMT industry group in the U.K., said yesterday in an interview.
Carmakers with plants in Britain, including Honda Motor Co., Volkswagen AG’s Bentley Motors luxury division and BMW’s Mini unit, have axed jobs and shuttered factories in response to the slump. Tata Motors Ltd. said in November it would cut 850 temporary jobs at the Jaguar and Land Rover units, and BMW is reducing shifts in Oxford and eliminating 850 positions.
The U.S. Congress plans to consider several proposals for scrapping incentives, and lawmakers probably will argue about how the subsidies would apply to overseas carmakers. A “cash for clunkers” proposal failed earlier this year after the United Auto Workers voiced concern that foreign-made vehicles would be eligible.
American Efforts
U.S. politicians particularly want to boost sales at General Motors Corp. and Chrysler LLC, which are surviving on taxpayer aid and face bankruptcy deadlines imposed by President Barack Obama’s administration.
The programs offered in several European countries led to improved sales on the continent last month. Car sales slid 9 percent in March, the smallest decline in six months.
Fiat SpA and Volkswagen were among companies that benefited most from the incentives because the payments tend to spur purchases of smaller cars. Sales by BMW and Daimler AG, the world’s largest luxury-car manufacturers, plunged more than the industry average. Volkswagen recorded more sales for its Skoda and VW models, and sold fewer luxury Audis.
The U.K. government pledged April 16 to offer subsidies of 2,000 pounds to 5,000 pounds on electric and some hybrid cars in an effort to encourage environmentally friendly technology.
