What should the short-term sales stimulus be?

  10 May 2020

There are growing voices calling for an auto industry stimulus. Pent-up demand may see sales (or, rather, registrations) tick over in the short term, but fears abound. If we’re set for the worst recession since 1709, then investing in new cars may not be at the top of consumers’ agenda.

A stimulus will help. Look at what scrappage did in 2008. But is a blunt scrappage scheme of that guise really relevant today?

You could consider rocketing 2008 Hyundai i10 sales. I’m sure Dacia will be itching for a £1k inventive from the government, to which they could match, taking the entry price of a Sandero down to a barely believable £4,995. Think of the headlines.

But things have moved on in a decade. Simple scrappage is no longer enough. Remember, the government has given itself an obligation for net zero by 2050. And wants to ban the sale of new petrol and diesel cars by 2035.

We’ve all grown to like the fresh air of coronavirus. And good health is a proven recipe against it. Which increasingly may point towards some form of low emissions scrappage scheme.

Even maybe a zero emissions incentive. It surely can’t be by accident that Grant Shapps called out the fact Britain’s two best-selling cars in April were zero-emissions EVs.

A scrappage incentive focused not only on bolstering new car sales but also cleaning up the air certainly isn’t likely to see much complaint from the public. I for one would be delighted if the smokey local 2005-era high-mileage diesels were replaced by a pollution-free EV.

It might include plug-in hybrids. It might stipulate that only the grottiest old cars are eligible. But evidence from other countries suggests some form of scrappage scheme is being looked upon favourably. Making it emissions-based and environmentally conscious would not only help tick the UK government’s goals, but also encourage consumers to take it up and help encourage one of the rare positives of lockdown – less pollution, less noise.

(And despite the calls from some that it’s heinous, I feel no pangs of guilt at scrapping a 15-year-old, 250,000-mile Audi A4 TDI, and neither should anyone else.)

How it works is up to the government. The £2k of back then won’t be enough these days, if it’s trying to grow EV and PHEV sales. But a VAT-free promise on top of the Plug-in Car Grant might be, particularly if OEMs are obliged to chip in a chunk of money-off cash to be eligible.

Scrappage worked last time round. But it was a bit of a blunt tool. A more nuanced scheme could do the same this time, and help accelerate the UK’s transition to net zero.

What a positive message it would be if auto retailers were at the centre of such a shift: this, surely, is the industry’s opportunity to pounce upon the bigger picture and establish its position at the centre of the UK’s shift to zero emissions.

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