Today it’s been reported in the Financial Times that UK government sources believe a scrappage scheme to boost vehicle sales is unlikely. At the weekend it was reported that a GBP6,000 incentive scheme was close to being signed-off, mirroring schemes introduced in Europe by the likes of France, Germany, Greece and the Netherlands.
Now it is understood that the treasury is looking at a wider-ranging fiscal stimulus package, to be announced in July, that will forego specific incentives for the automotive sector.
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The reasoning is that a scrappage scheme focusing on electric vehicles would stand to serve overseas OEMs far more than it would the UK’s domestic manufacturers. While there is merit in this argument – Tesla, BMW, Hyundai, Daimler, Volvo, Renault et al all have more substantive EV portfolios than JLR for example – it ignores Nissan’s long-term presence in the market with the Leaf and Toyota’s extensive focus on hybrid vehicles.
Furthermore, the viewpoint ignores the fact that the automotive sector is a highly efficient part of the economy to inject fiscal stimulus due to its high gearing. In other words, money spent in the automotive sector winds its way to other parts of the economy quicker and with less friction than if spent elsewhere due to the sector’s multifarious indirect benefits. It’s also relatively straightforward to institute as has been proven in the past.
The latest reports that contradict the position at the weekend only serve to introduce more uncertainty into the economy and the car market. Consumer confidence, the bedrock on which western economies thrive, is already severely eroded and fragile. Such toing and froing by policy makers only serves to compound problems.
GlobalData’s 2020 forecast for light vehicle sales in the UK of 1.88 million – a 29.9% fall on 2019 is predicated on some form of sector stimulus being introduced in the second half of the year. If no such stimulus is introduced it’s hard to see the UK market recovering much beyond the 51% fall in the market recorded year-to-date.
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