The Right Honorary Lord Mandelson, her Majesty’s Secretary of State for Business, Enterprise & Regulatory Reform, is preparing to give £2K (€2160) to UK citizens who scrap their old car and buy a new one, London’s Times reports.
“Under the proposed stimulus package, drivers would be able to turn in their car, which must be at least nine years old, and get a £2,000 discount on the purchase of any new or one-year-old car bought at a dealership in Britain. The motorists would have to deliver their old vehicles to one of a number of car recycling plants and receive a confirmation certificate. They would present this to a car dealer and get the government-funded £2,000 discount. Motorists would be able to purchase any brand of car.”
The British “scrappage scheme” sounds very much like the German Abwrackprämie, except that it pays a few hundred Euro less, and also has a little less red tape attached to it. The two could be twins . . .
Trade Minister, Lord Davies of Abersoch, admits that they got the idea from the bloody huns. In an interview with The Times, he said: “The scrappage scheme has potential. It’s been tried in other countries . . . we’re looking at it very closely.”
According to the Times, “there has been a surge in new car sales in Germany since the introduction of a similar €2,500 scheme.” Let’s call this British understatement. The German car market surged 21 percent in February. Car makers are running special shifts. According to the German magazine Der Spiegel, “the Abwrackprämie may enter history as the most successful administrative act of the grand coalition. Rarely has a supportive measure elicited hysterical reactions like this one: Car dealerships are getting mobbed, inventories of some automakers are running on empty.” Indeed, many German car dealerships can’t keep up with the demand. The order systems of major automakers reportedly have crashed several times.
More than 230K applications have already been filed (actually, it’s 241,280 as of today,) another 200K are in the pipeline, says the Zentralverband des Deutschen Kfz-Gewerbes (ZDK) the German interest group of the auto trade.
Click here for day-by-day, play-by-play statistics of the Abwrackprämie.
Blimey! A rare act of cleverness from the government…
I’d quite like to take hold of an old junked Jag for free, even if it doesn’t run, just to admire its aesthetic beauty.
Here’s what they plan to do with the “proceeds”…
–chuck
There is a sensible and a stupid side to this. The sensive side is that it adds money into the economy without directly aiding potentially failing car makers – its still up to the buyer to decide which car to buy.
The stupid side is that this will be sold as a “green” measure, newer cars being less poluting – without taking into account the resources required to make the bloody things in the first place.
There is something wider here though.
Although you can see this as being a direct plan to support car makers only, I see it as (potentially) being more significant. There is a view in the UK amongst the public that our banks have been rescued by us and are currently repaying that by refusing credit to even the soundest of businesses and individuals. Therefore pushing some of them into very difficult situations given the drop in demand.
With this scheme, from what I have read, it looks like uk.gov will bypass their own banks as being useless and will hand out the cash directly.
The message to the banks seems clear, get on with it or you will be made irrelevant when it comes to government putting more cash into the economy. And maybe that means you become less relevant in the future.
These “Temporary” measures have a habit of becoming permanent in the UK. A couple of other examples ? Income tax was introduced as a temporary measure to pay for a specific war, which ended a couple of hundred ago, if not more. Our arcane licensing laws were introduced to stop munitions workers in WW1 from getting pished and blowing themselves up – the law lasted until the early 2000’s.
And about bloody time anyway.
It was announced on Friday that General Motors is recalling Buick Enclave; Chevrolet Cobalt, HHR, Malibu and Traverse; GMC Acadia; Pontiac G5 and G6; and the Saturn Aura and Outlook vehicles due to a shift lever “Park” position defect.
GM spokeswoman Carolyn Markey said this would be a cheap and easy fix as only about 27% of the 277,000 vehicles manufactured were sold, the bulk of which remain on dealer’s lots.
I believe GM just let slip their cars are stacked up like cordwood all over the nation.
We’re ripe for a car purchase stimulus package ourselves.
Better than writing them checks, I suppose.
Better than the cash for clunkers idea in the US. At least getting 2000GBP for any 9 year old plus car is a genuine incentive. Not, “we’ll give you $4000 but only if it’s newer than 2002 and gets under 18MPG”
GM has only been in business for a century. They need a couple more to perfect the whole “Park” thing.
GM has only been in business for a century. They need a couple more to perfect the whole “Park” thing.
Ahem – The have 170,000 of these models alone “parked” all over the country.
Seems like they have the “PARK” thing down pretty well. It’s “design quality” and the “Sell” that they need to work on.
Here in Italy you get 5000 euro of the price of a new Honda
Insight paid for by the government , bringing the price down
to 14,900 euro, sounds like a good deal to me !
Given the sheer success of the German initiative this comes as no surprise. Actually, I’m surprised at how many other governments AREN’T establishing similar programs even as we type.
And the German program cost just €1.5b …. actually, it costs nothing, because the VAT makes up for it.
FWIW Im sure I could find a new home for every 03 and newer Saab/Opel turbodiesel halfcut.
This is not a particularly well thought through idea in the UK, just like it’s not in Germany. I might get a lot of flaming and fingers pointing to how it works but bear with me for a second.
This initiative brings in some people, who would otherwise not look at purchasing a new car into a new car dealership for the firsttime, since the prices of new cars suddenly become affordable. So far so good. What the Germans are hoping is that the total market size will be increased as a result, on a PERMANENT basis. Let’s examine this – from a purely theoretical perspective. The average car age in Germany is just short of 9 years. Given that sales levels have been pretty much flat (+/- 5% annually) since 2000 and some other data on the car pool from earlier on (which can all be obtained from the KBA for free) the distribution is relatively flat and around half of the cars are more than 9 years old (IIRC). That is ca. 23 million cars in Germany.
A large part of those 23 million will be worth significantly less than even the cheapest new car, with a discount and an Abwrackpraemie. Hence you might have 2-3 million buyers, who could potentially qualify – and that is stretching it quite a bit already. In the short run bringing them into the markethas benefits – it keeps the balance sheets of car manufacturers healthier and makes sure the supplier base survives for a bit longer. The problem is that sooner or later those buyers will get exhausted, and given that they previously drove cars for quite some time, or had very old and cheap ones, they will drive those cars for a very long period of time – so they will not return to the market any time soon – next 8 years is probably a good estimate. So by boosting the market temporarily you will lower replacement rates for the foreseeable future.
As I said, this can work and could make sense but only under one condition. Namely that the automotive industry sees this for what it is and downsizes dramatically over the next 3 years (better to do it even sooner). To around 65% of current capacity. In that case a bridge is provided to them towards a sustainable future. If this does not happen, it’s just a very dragonfly like maneuvre – eating your own bodyparts when hungry. Yes, they will feed you now but you will also sorely miss them afterwards.
Another qualifier why this should not be tried in the UK, even if it works in Germany is the state of indebtedness. This is fairly low in Germany and people generally tend not to slide into massive overspending. In the UK it’s at breaking point with massive numbers sliding into negative net worth on a monthly basis. Encouraging them towards further spending is one of the most irresponsible things government can do at the moment.