Today marks the beginning of the exit phase of the UK’s scrappage scheme, with the final allocation of 50,000 further orders for carmakers. It will end when the budget for the scheme runs out, or at midnight on Wednesday 31st March this year, whichever is sooner.
The UK government has provided up to £400m ($617m) for the scheme, which has been matched by funding from manufacturers, with 37 involved in the final phase.
“This is last orders for the scrappage scheme,” said Business Secretary Peter Mandelson. “Car owners need to move quickly to avoid disappointment if they want to buy a new car a discount."
There are no plans for extensions but certain carmakers have announced deals designed to keep customers interested beyond the end of scrappage.
“Introducing the seven-year warranty across the range in January has helped demand for Kia products considerably and showroom traffic is up significantly,” said Kia spokesman Steve Kitson, adding that the vast majority were not scrappage buyers.
As a consequence, the company does not see its logistics contracts for delivery to the UK being negatively affected in 2010.
“We aim to try and match our 2010 sales performance and that means we'll require deliveries both long-sea and short-sea matching 2009 levels,” Kitson told Automotive Logistics News, adding that the company expects to sell a minimum of 45,000 vehicles this year, with a possibility of hitting 50,000 if the market remains stable.
Meanwhile, Nissan’s manufacturing plant in Sunderland UK is currently in the process of implementing a third production shift on its Qashqai line to meet demand beyond the end of the scheme; production is due to be fully operational in May.
In terms of the scheme, Nissan reckons its remaining quota represents around three weeks’ worth of orders and is managing the run-out carefully with its dealers.
“The precise impact that the end of SIS [scrappage incentive scheme] will have is not known at this stage, so as ever it's a case of staying very close to the market and being prepared to react quickly and flexibly at the appropriate time to ensure our volume matches demand,” said spokesman David Swerdlow.
“We have been operating extremely flexibly for some time now as a result of the volatility caused by the economic downturn – both upwards and downwards,” he continued. “So this kind of ongoing volume adjustment is becoming 'normal business' for us now.”
Logistics providers Groupe CAT also commented that maintaining flexibility would be the company's most important response to the end of the incentive period.
"Vehicle volumes are currently quite strong, but along with many operators and manufacturers in the UK, we do not have full visibility of how the market will unfold for the rest of the year," said a Groupe CAT spokesperson. "It is our policy therefore, to maintain our ultra-flexible approach, so that we can continue to meet any challenges or changes within the market should they occur."
Car production in the UK showed a rise of 64.8% in January according to figures from the Society of Motor Manufacturers and Traders, the biggest rise since May 1976, and is in part explained by improved sales because of the scrappage scheme, as well as low 2009 volumes.
Paul Everitt, chief executive of the SMMT, said: “Vehicle and engine production rose for a third successive month in January, demonstrating the continued success of global scrappage incentive schemes.”
However, figures from the rest of Europe, in markets where similar schemes have already ended do not bode well.
Fiat closed all five of its assembly plants in Italy for two weeks on Monday, as well as a joint venture plant with PSA Peugeot Citroën, following the end of incentive schemes there.
Quoted in the New York Times, Fiat spokesman Richard Gadeselli, said the scrappage schemes had brought forward sales and without their continuation 2010 could be a tougher year.
In Germany, meanwhile, the end of the Umweltprämie (environmental premium) incentive scheme, could see the market drop by 25% according to HSBC figures quoted in the national press. UK sales are forecast to decline by 10% in comparison.
