Tuesday 17 May 2010: The Green Piece Column.
According to figures from the Society of Motor Manufacturers and Traders (SMMT) most of the 400,000 vehicles ordered through the scrappage scheme have now been registered meaning the motor industry has nearly received its final boost from the concept.
During April, the scheme accounted for just eight per cent of all new car registrations after officially closing on March 31; however, since its launch it has accounted for 18 per cent of new UK car sales.
So as the dust settles on the concept can it be hailed a success? Here we look at the winners and losers.
Reasons to celebrate
According to SMMT chief executive Paul Everitt, the scheme helped to “support the economy and played a vital role in providing a much-needed boost to the UK auto industry.”
He suggests that the 2010 market is likely to perform better than expected even though it will be subdued compared to the peaks of the campaign. This means that the initial drop-out should not be as bad as expected and it may be that the scheme carried the industry through its rough patch rather than simply delaying the inevitable shortfall. What’s more is that the wider economies have also benefited with a boost for the manufacturing sector as a whole – some analysts would argue that these schemes played a vital role in lifting both France and Germany out of their recessions in April and June last year.
Though initially a contentious point, it seems the planet too has been boosted by the scrappage scheme. According to the final analysis of the scheme, the cars registered had average CO2 emissions of 132.9g/km – 27.1 per cent below the average car scrapped. That figure is also 9.5 per cent below the 146.9g/km average for all new cars registered between May 2009 and April 2010.
In terms of carmakers, the biggest beneficiaries have been Asian manufacturers with motorists targeting the small cars that Japanese and Korean automakers traditionally excel in. For example, in the US, Hyundai saw sales rocket by 47 per cent in August last year during the “cash for clunkers” campaign; with Honda enjoying a commendable boost of its own at 10 per cent year on year. Indeed in the UK, Hyundai has been the outright winner with figures showing it had made 38,870 scrappage sales at the end of February with its entry level Hyundai i10 Classic proving particularly popular.
European carmakers have benefited too, particularly those that specialise in small vehicles – Citroen saw its sales rise by 19 per cent in August compared to the previous year; with Renault and Fiat enjoying 10 per cent gains.
Ford however, is arguably the biggest single winner given where it started and where it is now. One of the world’s biggest carmakers was teetering on the brink of disaster at the end of 2008 but it managed to avoid taking US Government money and saw sales jump by 17 per cent at one point placing it in a much healthier position.
Reasons to commiserate
Some of the biggest losers in the scrappage scheme have been second hand car dealers and owners – after all, if you can buy a new car for a similar price then why would you opt for a used car? Car rental prices have also been forced up due to a decrease in demand and luxury car makers have taken significant hits – for example, during the height of the cash for clunkers campaign, BMW saw its sales drop by 18 per cent in the US.
There are also many environmentalists that continue to argue against the scheme believing that trading in an old car for a new one is not environmentally friendly. They argue that it takes a lot longer than four-six years to offset the CO2 emitted while producing a new car. Indeed small, cheap cars may have engines that are less efficient than the vehicles they replace and there was no cap placed on the emission levels of the new vehicles that were acquired as part of the scheme.
Our verdict
In the very first edition of The Green Piece, nearly a year ago, we looked at the scrappage scheme and expressed scepticism over the lack of an emissions cap (see article).
While we still believe that more could have been achieved for the environment had a cap on CO2 emissions of 140g/km been implemented, the fact that new cars registered under the scheme have average emissions significantly below that threshold suggests it has done its job anyway. Indeed we don’t subscribe to the theory that emission savings from new cars are offset by the emissions produced during their manufacture in this case, because these are cars that were going to be produced and bought anyway.
Of course only time will tell whether the scrappage scheme really saved the industry as a whole from a terrible fate; or whether it has simply offered a stay of execution. However, there’s no denying that the scheme has given automakers a chance to get their “house in order” and find ways to restore profit margins without the incentive trap.
There are tough times ahead but there’s little doubt the scrappage scheme has navigated the industry through a rocky road and put it on track to a greener future.
Faye Sunderland
