Could an austere post scrappage world be too much for a fragile automotive industry

The austerity measures about to be undertaken by the new coalition government could have a dramatic effect on car sales in this country. We have already seen showroom footfall decline by up to 40% year on year in some dealers and the worry clearly is that if VAT rises and the other stealth taxes kick in then the effects could be catastrophic.

With the industry now emerging blinking into a post-scrappage world, and the scrappage scheme widely accepted as having being a resounding success, it may be that a fragile automotive industry could suffer more than most in an austere new world and all that good work will have been for nothing.

The car industry could be right back where it found itself in late 2008. Of course there are far fewer cars being built now and car makers and their franchised dealer networks appear to have learned the lessons of disastrous pre-registration exercises and buy back deals which helped assist in the downturn originally.

Although depreciation patterns have returned to more traditional norms, people in the trade are very worried about the future if action is not taken. It will be interesting to see if this government is prepared to back the industry in the same way as the last and whilst it is unlikely that the full scrappage scheme would come back, it must be acknowledged – and the figures bear it out – it was a massive shot in the arm, stimulating sales and helping many car companies remain profitable.

Despite some attempts by dealers to continue their own scrappage type promotions, the free publicity and goodwill created by a national scheme cannot be underestimated, and therefore it is hoped that a similar initiative can have the desired effect today. Let’s face it the scheme was largely paying for itself in increased VAT revenue and not to mention the positive environmental benefits, which even if they were overstated somewhat, clearly put green issues firmly on the national agenda and made consumers think more about their actions, even if there was a financial incentive to do so.

We are coming up to summer sales time in the car game so customers should carry on reaping the benefits of buying cheaper cars, however in order for the market to not completely stagnate a new imitative aimed at creating more car sales and protecting jobs would be very welcome.

We are not, however, holding our breath.

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One Response to Could an austere post scrappage world be too much for a fragile automotive industry

  1. Kevin Wicks June 16, 2010 at 7:55 am #

    Boo Hoo! No more handouts! If people don’t want or can’t afford to buy cars the so be it. It’s called market forces.

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