Saturday, September 19, 2009
UK Scrappage Scheme - Aftermarkets effects
Launched with much hype during the height of the recession when the motor vehicle industry was experiencing the most difficult of times, the end of the Government scrappage scheme is almost upon us. This being the case, now is a good time to pause and reflect on what its effects have been not only on new car sales but further downstream as well.
According to Malcolm Tagg, the Director General of the VBRA, the UK's leading Trade Association for Vehicle Body Building, CV, Car Body and SMART repair, the scheme has been no bad thing in terms of stimulating new car sales and removing "old Bangers" from the roads, but has had little effect on the vehicle repair and servicing industry. Interviewed recently he commented, "Any reasonable and, for the tax payer, affordable incentive that stimulates the automotive market must be a good thing with the proviso that it does not mask natural competition. On this basis I believe the Government have got things "right". Additional sales promoted by the scheme have contributed to better headlines, probably saved some jobs and allowed more money to circulate within the system."
Reflecting on how the scrappage scheme had impacted onto downstream vehicle markets Tagg added, "It might have been expected that opening the taps at the head of the process by which vehicles are brought onto the roads would rub off in some way with repairers and in other aftermarket sectors. This is an expectation based on the supposition that older cars generate more work for repairers and others but it is in fact not totally the case. For example, older vehicles tend to be third party insured and of relatively low value. This means that they tend not to be repaired unless absolutely essential, continued running with cosmetic damage or scrapping being the most favoured options." Continuing Tagg added, "Another often overlooked factor is that during the entire period of the credit crunch there have been fewer vehicle movements per se as both individuals and organizations endeavor to husband the financial resources at their disposal. Fewer vehicle movements obviously result in fewer accidents so repairers suffer."
Concluding Tagg stated, "Overall we must view the scrappage scheme as a useful initiative that has brought benefits to the main vehicle manufacturers. The scheme itself, together with several other factors, has not provided any benefits to the repair market although it has not harmed it in any way either, the net impact being neutral."
DATED: 19.09.09
FEED: AW
