British Incentive Program Hopes to Spur New Car Sales

By Tom Rivers

London
18 May 2009

Facing record auto industry losses and with thousands of jobs on the line, Britain has launched a new car incentive program aimed at spurring sales.  Under the deal, qualified motorists will get a $3,000 discount on the purchase of a new vehicle.   

Given the depth of the problems facing the auto sector around the world, one answer to moving cars out of the showrooms seems to be spreading.

What began in Germany and spread to France and Italy has now moved to Britain.  The idea is a joint government-manufacturer incentive plan to give consumers with old car trade-ins a $3,000 cash back deal on the purchase of any new car.

The $450 million program is designed to boost plummeting car sales in Britain that will in turn help to save auto sector jobs.  A secondary benefit is getting gas-guzzling old clunkers off the road and replaced with more fuel-efficient band new models.

In order to participate in the plan, car buyers like Georgie need to trade in a car that is at least 10-years old.

"I heard about the new scheme when it was announced in the budget and my car qualified as old enough," said Georgie.  "So I thought, if I was going to buy a new car, this would be a good time."

Under the deal, half of the $3,000 discount comes from the government, the other half comes from the car manufacturer.

And while it may not solve all of the problems facing the industry today, people like Jon Pollock, the marketing manager of Toyota G.B. say it is a program that will help.

"The scrappage scheme will bring incremental business to the market.  We are indeed already seeing that," said Pollock.  "Is it the panacea solution to the economic crisis and the car market in the U.K.?  I think that is more debatable, but we have to be honest that anything that does bring new people to market has got to be good news to the economy and has got to be good news to the market in Britain."

In Germany, a similar program boosted sales by 20 percent.  For the first four months of 2009, new car sales in Britain were down nearly 30 percent, so there is much hope the incentive plan can persuade some to purchase now.

The program is scheduled to run through next March.

Other countries will be watching with interest.  Japan is considering its own plan, but with incentives there aimed more at selling hybrids and electric-car options. 

In the United States, a vote in Congress is expected in the coming weeks that could authorize up to $4,500 to individuals who trade in vehicles in what has become known as the "cash for clunkers" bill.

According to USA Today, the price tag of getting such a program up and running in America would be around about $4 billion.