Scrappage – what happens next?

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The scrappage clock is ticking and many dealers are becoming nervous about what happens when the incentive runs out of cash. There are of course the inevitable calls for an extension, and to be fair there’s no doubt the scheme has worked so it will be great if that happens, but eventually the business has to be able to stand on its own two feet when the financial crutch is taken away. The August sales figures show a 6% increase in registrations on last year, down, of course, to the success of the scrappage scheme but take away the sales from scrappage and the market was 20% down. Further compounding these troubling statistics is the fact that it was about this time last year that the recession was really starting to bite and numbers were already 18.6% down on the previous year’s results. So in a post-scrappage world what shape are we really in? Although the feel good factor has clearly benefited some makes which wouldn’t be obvious scrappage candidates, apart from the small economical supermini sector has there been any other real winners?

Much of the criticism of government back incentives and subsidies to bolster the flagging car market centred on what happens when any incentive stops. The fact is, whether we like it or not, the scrappage scheme presents us with a false market and a great many people fear that we are just delaying the bad news. It might be true to say that a proportion of the cars sold through the scheme would never have been sold in a normal market and the buyers themselves would never have set foot in a new car showroom without the scheme, but the cars they have bought are, of course, the least profitable. Another argument is that sales are just shunted forward into the window of the scheme and ensuing months then suffer accordingly. A lot of people will be nervously looking toward Germany to see how the market performs now their own scrappage scheme has ended.

Let’s take a look at what might happen next and concentrate on the positive aspects of a leaner, hungrier retail trade. One definite positive result is that car makers have hopefully now learned that mass self registration exercises to massage sales figures and falsely increase market share is a short term fix and not a viable solution for them or their dealer network.

Dealers for their part having successfully cut costs, closed unprofitable branches and vastly improved the service they give to customers, will also need to continue being laser focused on ensuring that they are competitive, offer a range of products which can benefit customers and ensure the service they offer is good enough for customers to remain loyal to them. The training which new staff members can expect should be designed more around customer service and less around hard selling closing techniques, because as one manager told me, ‘our sales process is now so detailed and comprehensive that if followed religiously should give the sales team every opportunity to make the sale anyway’

It certainly seems to be the case that old style tactics are a thing of the past and customers in the main will go completely cold if they feel they are being pressurised and anyway if the deal is right and the car fits it will be a more committed sale as a result of sharing information during a sales presentation. The old adage of “test drive sell cars” will always be relevant, and with many independent car showrooms offering at least as good, and in some cases much better and more personal service, the whole industry will hopefully learn from the past, push on with the future and carry on selling.