UK government considers £6,000 scrappage scheme
With the automotive market on its knees following record-breaking low sales during the peak of the nationwide lockdown, government is looking to implement a scrappage scheme to stimulate the market offering up to £6,000 off the purchase price of a new vehicle.
Prime Minister Boris Johnson is looking at repeating history and turning to a scrappage scheme to boost the automotive sector, much what government did in 2008-9 following the financial crisis of the time.
The scheme would see up to £6,000 offered off the purchase price of a new vehicle with a qualifying trade-in handed over for scrap. The scheme, should it be approved, would likely start in July. Concurrent to the scrappage scheme idea, others are calling for the same sum to encourage drivers to make the switch to electric vehicles.
Some reports, notably by the Telegraph, suggest the scheme would target the scrappage of petrol and diesel vehicles to encourage the purchase of an electric vehicle.
BVRLA chief executive Gerry Keaney said, “To be truly effective, any EV stimulus scheme must work for both the new and used market. It should make the UK a more attractive market for OEMs to sell their EVs and help those who cannot afford to buy a new electric car to purchase or lease a used one. Any scheme that focuses solely on supporting new vehicle sales could damage the residual values of ex-fleet cars and thus hinder the sector’s ability to invest in new electric vehicles.”
Other sources believe a scrappage scheme could be more wide-reaching, with electric vehicles already benefiting from the government’s Plug-in Car Grant that takes off £3,000 from the purchase price of a new electric car, and up to £8,000 for an electric van.
SMMT sales figures for the month of May showed a fall of 89% with just over 20,000 cars sold, with 163,477 fewer registrations than in the same month in 2019. The performance marked the lowest May since 1952. Private buyers accounted for the lion’s share of registrations at 63.7% of the market, equivalent to 12,900 units, while 6,638 cars went to fleets.
Similarly, LCV sales were down 74.1% in May to 7,541 units, despite demand for extra vans on many delivery fleets.
However, What Lease Ltd (trading as Lease Fetcher and What Lease) data indicated that since the Prime Minister’s launch of the recovery strategy on 11 May, there has been an uplift in demand. So much so, that demand is now parallel with pre-lockdown numbers in many cases, the company said. This could indicate that the government is biding its time before deciding upon the scrappage scheme to see how June sales figures progress, following the opening of most dealerships on 1 June.
Jon Lawes, MD of Hitachi Capital Vehicle Solutions, commented: “A car scrappage scheme could prove to be a tipping point in incentivising consumers to switch to electric vehicles. Environmental concerns have been driving demand for EVs, with a 21% increase in sales last month. Our own research showed that over quarter of consumers are now considering purchasing an EV after lockdown, with a further 40% of workers considering greener modes of commuting, so demand is definitely there to drive a green revolution.
“However, building demand for EVs must go hand-in-hand with delivering the infrastructure needed to make rapid charging a reality. Our partnership with GridServe to build the UK’s first rapid charging electric forecourts marks a real step change in addressing this challenge and will help to fast-track electric vehicle adoption across the UK.”
Adam Eskdale, associate in the digital economy team at law firm Ashurst, added: “Should the scheme be successful, it will help to alleviate the chicken and egg problem with electric vehicles in the UK– i.e. there are not a high number of EVs, and so there is no need for easily available charging infrastructure, which is itself a blocker to wider adoption of EVs.
“However if the government’s goal is ultimately sustainability, and a green recovery, then it needs to bolster this approach to EVs with a much more systemic promotion of energy efficiency and decarbonisation technologies, as well as the digitalisation and smart infrastructure required to implement them.
“Without this, the environmental and ultimately economic benefits of EVs will be offset by the failure to align the green potential across energy transition, digitalisation and government policy.”
Fiona Howarth, CEO of Octopus Electric Vehicles, commented: “It’s essential for the government to implement this incentive as it is critical to drive change. The upfront cost of electric vehicles can still be seen as a barrier, despite the low lifetime and running costs. With lockdown bringing huge improvements in the quality of the air we breathe, this would solidify the government’s commitment to our health and the future of the world we live in.
“Consumers who want to switch to greener driving can be put off by the more expensive initial outlay for an electric vehicle compared to petrol or diesel. But by reducing this cost, EVs will become more affordable and dramatically increase uptake.
“We have a once in a lifetime opportunity to enact change. We have seen the effects of fewer drivers on the road and how much healthier our air is as a result. In 2019, around 100 people every day were losing their life due to poor air quality. The government can really make a difference and save lives by encouraging the switch to clean, electric cars. If we wait until lockdown eases, drivers will return to their normal routines and perhaps forget the long term benefits of what we have seen during quarantine.”