BusinessCar Office Blog: 21 August 2009 - Scrapping over scrappage
21 August 2009
BusinessCar Office, yesterday
Why do I get the feeling there's a story yet to unfold regarding the scrappage scheme.
Yes, retail sales are up, but amongst the raft of self-congratulatory publicity from the brands punting hordes of small cars out to people dumping their ten-year-old cars, I'm worried there might be a problem or two on the horizon.
As we pass the halfway point in grant availability, Glass's Guide has already joined several car dealer groups in calling for the scheme to be extended to avoid a sudden (if entirely predictable) drop-off in sales. Which is the problem with a market currently being forced beyond its natural levels.
Then there are the manufacturers that have expressed concern about the rough-shod way the scheme was introduced. The only way to get the £1000 Government grant was to agree to match it across every single model the manufacturer sells. I can't imagine any discount would have been easy to come by on a whole raft of new and in-demand models such as the Toyota iQ, Fiat 500C, Alfa Mito or Nissan Pixo, let alone manufacturers having to give £1000 off, but to be in scrappage you have to be completely in and every model had to be included.
Indeed, just this week I picked up a rumour that one manufacturer had brought a new model in at £1000 more than originally intended because of scrappage, and that it will drop the price by a grand once the scheme has gone. Keep an eye out for plenty of moves like that.
But most of this stuff isn't having a massive impact upon fleet, even if it does mean manufacturers are more focussed on retail than they would normally be during a tough economic period. But the big question is residual values.
I'm yet to hear a clear view on what a sudden spike in sales of small cars will do to the RVs a couple of years down the line. Though there's a debate about whether people scrapping a ten-year-old car will come back and trade it in after three years, there will still be a whole load of city cars and superminis flooding back into the market that maybe wouldn't have expected, especially from firms like Hyundai that have experienced demand like never seen before off the back of scrappage.
I'm not sure what it is yet, but I feel there is another tale yet to be told, lurking away behind the flag-waving retail success story supposedly lighting up the UK car industry this summer.