Coronavirus: Scrappage scheme may be required to jump start car industry

Car makers are calling on the UK Government to introduce a scrappage scheme or other incentives to boost new car sales in the wake of the Coronavirus pandemic.

The PSA Group is already in talks with the Government about the possibility of incentives to boost the automotive retail sector, with managing director Alison Jones telling BBC Newsnight that, while she did not expect demand among car buyers to “come back” until Q4, a CO2 emission-based scrappage scheme was being discussed.

Ford of Britain managing director Andy Barratt, meanwhile, insists that the car maker will not be able to return sustainably to pre-crisis levels of production unless its showroom network is able to reopen, and unless the government does something to stimulate demand for new cars.

He told ITV: “Without any degree of stimulus, there is no doubt we can’t keep the factories running on the UK demand levels as they are.

"Other countries are bringing stimulus in, so manufacturing and production will move elsewhere.”

The new car market fell by 97.3% in April, with just 871 cars registered to private motorists in the month, compared to 67,783 in April 2019.

There were 3,450 new cars registered to fleet and business – an all-time low but still represented four out of five cars (79.8%) registered last month.

Earlier this month, automotive retail research organisation ICDP published a ‘clean cars for a post-COVID recovery’ report, which called for the introduction of an OEM-backed CO2 emissions-reducing car scrappage scheme.

It said that such an incentive was needed in order to avoid a “perfect storm of stalled sales” and “soaring fines” from stringent new EU regulations driving carmakers “to the edge”.

The report said: “Without intervention in the market a recovery is likely to be protracted and this will lead to business failures amongst dealers, and potentially with manufacturers.”

Jones’ PSA Group colleague, Vauxhall managing director Stephen Norman, told BBC Newsnight that he was keen to get car retail back up and running.

Updated Government guidance published in its 50-page ‘COVID-19 Recovery Strategy’ document earlier this week indicated that car dealerships' showrooms are unlikely to be allowed to open before June 1, when other “non-essential retail” business may be allowed to open their doors.

That date is dependent on a controlled COVID-19 infection rate across the UK, however.

Speaking from the Luton LCV manufacturing facility, which re-started production this week, Norman said: “The key factor in the ramp-up (of the automotive sector) is the ability of car dealerships to re-open to customers so that we can take new orders to support the production that we make here.”