Simply Jobs Boards | 
01 20th, 2010| 
Scrappage schemes sent car sales soaring towards the end of 2009, not just in the UK but across Europe.
In the UK, a late rush sparked a 38.9% rise in sales in December when compared with the same month in 2008, further building on months of strong sales since May when the scrappage scheme came into effect.
Since its introduction, the scrappage scheme has accounted for over a fifth of all new car registrations, according to the Society of Motor Manufacturers and Traders (SMMT).
But the UK scheme, which offers new car buyers a £2,000 discount if they scrap a car older than 10 years, failed to make up for last year’s dire performance, so for the year as a whole new registrations fell 6.4% from 2008 to less than two million cars.
And the year ahead may well be tough, warns Paul Everitt, chief executive of the SMMT.
“The crisis-limiting measures taken by governments have been highly successful, while they lasted, but some in the automotive industry must now brace themselves for a year of difficult conditions as incentives disappears,” automotive forecasting body JD Power says.
David Raistrick, UK manufacturing leader at consultants Deloitte, agrees.
“2010 figures will be affected by the impending end of scrappage, the increase in value added tax and the rising input costs resulting from the fall in sterling,” he reasons.
European impact
Scrappage schemes similar to the UK one have boosted sales in other European countries too.
In Germany, Europe’s largest car market, sales rose 23% during the year, according to the motor industry federation VDA.
This was “the biggest jump since reunification in 1990″, observes Timo Klein, automotive industry analyst with IHS Global Insight.
In France, car sales leapt 10.7% last year, the biggest rise in a single year since 1990, according to the French motor industry body CCFA. French carmakers gained market share in the process.
Spain’s scrappage scheme also sent sales higher in recent months. In December, sales rose 25% compared with the same month a year earlier in spite of a fall in sales to companies with a notable 56% drop in sales to car rental firms. This was made up for by a near 48% rise in sales to individuals.
However, strong sales towards the end of the year failed to make up for serious weakness earlier in 2009, so for the year as a whole Spain recorded a near 18% fall in sales to less than a million cars – the weakest result since 1995. Sales to car rental firms fell 26% during the year.
New scheme
Countries that did not offer scrappage incentives fared badly in 2009. In Ireland, sales fell 62% during the year, according to the Society of the Irish Motor Industry (SIMI).
“However, help could be on the way in the shape of a scrappage scheme that is to be put in place by the government,” says Ian Fletcher, automotive analyst, IHS Global Insight.
The Irish scheme will have a greater focus on environmental performance by only offering scrappage incentives to those who buy cars emitting less than 140g/km.
“Dealers across the country are reporting increased footfall in their showrooms and very strong interest in the scheme,” SIMI director Alan Nolan says.
Tough year ahead
But Irish hopes aside, the year ahead is set to be incredibly tough for European carmakers.
In Europe, sales are set to fall 10.5% to about 12.2 million this year from about 13.5 million in 2009, JD Power forecasts.
This is partly because the various scrappage schemes encouraged people who had no plans to buy new cars this year to do so anyway.
Countries that did not offer scrappage incentives fared badly in 2009
Many of them will have been recruited from this year’s pool of car buyers, leaving fewer potential customers for 2010.
Another consequence of this is that the carmakers that gained the most from the scrappage scheme last year are likely to be the ones that will suffer the greatest falls in sales this year – so makers of small cars may well be outperformed by firms making large or luxury cars in 2010.
Similarly, countries that saw the greatest upswing in sales following the introduction of scrappage may well see the sharpest fall this year. It may well be a story of the higher they climbed the harder they will fall.
According to plan
So the situation in Germany could prove particularly difficult this year, with new car registrations set to tumble from 3.8 million in 2009 to 2.8 million in 2010, IHS Global Insight predicts.
Carmakers who gained most from the scheme may suffer most this year
But that is not to say we should feel sorry for German carmakers, Mr Klein explains.
The German scrappage scheme helped them through a difficult period, so although weakness in their home market will be painful it may well be offset by a recovery in export markets.
“This strongly suggests that, with an eye on car production in Germany, the bridging function of the scrappage subsidy has worked exactly as intended,” Mr Klein says.
“German car production may well increase in 2010 despite the drop in domestic demand.”
Company cars
Elsewhere, with consumers expected to steer clear of the car market this year, carmakers are relying on companies to come back into the market as the economic recovery gains momentum.
“Sustaining the progress made in the latter part of 2009 will require stronger demand from fleet and business buyers,” according to Mr Everitt.
And fleet buyers are ready to fill the void, according to John Lewis, chief executive of the British Vehicle Rental and Leasing Association.
“Companies have been putting off their buying decisions and running their existing fleets for longer before replacing them, so 2009 saw a real slump in the business car market, which saw its share of new car registrations fall below 50% for the first time in 16 years,” Mr Lewis says.
“These vehicles will need to be replaced soon and with an economic recovery underway, we expect fleet car sales to pass the million mark in 2010, providing a vital shot in the arm for manufacturers.”
Source : BBC
