Scrappage and Emperor Mandelson’s new clothes

With immaculate timing Lord Mandy has announced the extension of the cash for scrap scheme. This is welcome news for many dealers as their new car performance this year has been mainly underpinned by the scheme. Of course the announcement, and its timing, has also scored the government some important political points too, which will obviously never go a miss.

After many high profile pleas for a scrappage extension and the repeated line from the government that, no there was no money available for extending the scheme, we get the unelected Business Secretary announcing with a wave of his hand at the Labour party conference that the government will, after all, extend the scheme. We have to presume this was their intention all along lest we believe it was just dreamt up on the day of Mandelson’s speech, either way it looks bad. But for many the political point scoring will be irrelevant because there’s no doubt, whatever the possible problems, the scheme has given a much needed boost to new car sales, even though in August the market was only 6% up on August 2008 when we were already suffering from the “credit crunch” and the new car market was suffering at nearly 19% down on August 2007.

The underlying feeling, if this scheme had not been continued, was one of concern that new car sales could have crashed again with the calamitous prospect of a repeat of last year’s job losses and bankruptcies.

I wonder though just how many old scrappers are actually left still out there and whether the drivers who own them are in any better position to take advantage of the incentive than they were 6 months ago. Add to this the fact that if access to finance remains as difficult as it has been then you have to wonder if the scrappage scheme will run out of steam before it runs out of cash. If that happens it stands to reason that car makers will expect dealers to make a greater contribution than at present to incentivise buyers to take up the offers.

Mandelson says no to scrappage extension