What happens after the car scrappage scheme?

October 02, 2009 11:31 AM

Evidence from the United States suggests that the car scrappage scheme might just have caused people to bring forward their purchases a little, and done little for the industry in even the quite short term.  Megan McArdle writes that:



Cash for Clunkers moved a bunch of auto sales forward, causing people who thought they might replace their car in the next year or two to rush into the showrooms.  Now, in the aftermath, sales are plummeting:  47% at GM, 44% at Chrysler, 8.9% at Ford, 16% at Toyota, 23% at Honda, 11% at Nissan.  I hope those car companies used the cash infusion now, because they'll be on lean rations for months, even years.


That suggests the scheme won't do much for the motor industry even in those countries who make a lot of their own cars.  Those dealers who have enjoyed an increase in sales under the scheme had better be ready for the famine.  Unfortunately, as the Economist has noted only "22% of the cars produced in Britain are sold there and only 14% of those bought in Britain are made there, so a scrapping scheme would mostly benefit firms abroad" so the payments are even worse value for British taxpayers as much of the money will flow abroad.


If the Government really wanted to help the motor industry they'd scrap their rises in Vehicle Excise Duty, which have threatened people looking at buying Jaguars or Land Rovers, in particular, with massive charges.

Evidence from the United States suggests that the car scrappage scheme might just have caused people to bring forward their purchases a little, and done little for the industry in even the quite short term.  Megan McArdle writes that:



Cash for Clunkers moved a bunch of auto sales forward, causing people who thought they might replace their car in the next year or two to rush into the showrooms.  Now, in the aftermath, sales are plummeting:  47% at GM, 44% at Chrysler, 8.9% at Ford, 16% at Toyota, 23% at Honda, 11% at Nissan.  I hope those car companies used the cash infusion now, because they'll be on lean rations for months, even years.


That suggests the scheme won't do much for the motor industry even in those countries who make a lot of their own cars.  Those dealers who have enjoyed an increase in sales under the scheme had better be ready for the famine.  Unfortunately, as the Economist has noted only "22% of the cars produced in Britain are sold there and only 14% of those bought in Britain are made there, so a scrapping scheme would mostly benefit firms abroad" so the payments are even worse value for British taxpayers as much of the money will flow abroad.


If the Government really wanted to help the motor industry they'd scrap their rises in Vehicle Excise Duty, which have threatened people looking at buying Jaguars or Land Rovers, in particular, with massive charges.

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