Toyota calls for extension to UK car scheme

Publication date: 04 May 2009

Britain’s vehicle scrappage scheme to be introduced this month has “got to be longer” than its planned 10 months’ duration to be effective, Toyota’s head of European sales has warned.

Thierry Dombreval said the Japanese carmaker welcomed the £2,000 ($2,987) incentive announced in the Budget for consumers trading in old cars, and that similar schemes in western Europe would add 1m units to overall industry sales this year.

Yet he said the scheme – due to expire in March 2010 or when its £300m funding runs out – would need to be extended.

“It’s got to be longer,” Mr Dombreval told the Financial Times. “Natural demand for cars is not going to come back in 2010.”

The Department for Business told the car industry this week that the scrappage programme would begin on May 18 if the mechanisms needed to administer it were in place by then.

Toyota estimates that the overall UK car market shrank 27 per cent on a year ago last month. April vehicle registration data are due to be published later this week.

The Japanese carmaker, which has overtaken General Motors as the industry’s top-selling producer, estimates that its April sales in Germany, which offers a €2,500 (£2,225)-per-car scrapping bonus, will be 70 per cent higher than a year ago.

Toyota’s intervention is the latest in the growing debate round scrappage schemes, as Britain’s plan comes under criticism from different camps.

Car manufacturers are unhappy with the government’s requirement that they contribute up to half the £2,000-per-vehicle bonus themselves. Germany’s government funds the full bonus itself, which some manufacturers are matching in full.

Unlike in Germany, about four-fifths of the cars sold in the UK are imported, which some critics of Britain’s scheme say will further limit its effectiveness.

Honda imports many of the smaller cars due to profit from scrappage schemes in Japan and struggles to make money on them because of the strong yen.

Faced with having to offer consumers another £1,000 back on these cars, the company had pressed government to limit the scheme to UK-built cars.

Nissan , Britain’s biggest carmaker, is trying to encourage trade-ins of old cars for its UK-built models by offering to subsidise trade-ins of eight-year-old cars itself. The government scheme applies only to cars 10 years or older.

Mr Dombreval said that it could take five years “at a vigorous rate of growth” to return to the 21m cars sold across Europe and in Russia in 2007.

“Underlying demand is so low that it helps for incentives to be in place for a longer period of time,” added Mr Dombreval.

Some analysts, however, dispute the notion of keeping the plans in place for long periods. Spain has had a scrappage plan in place since January 2008, but vehicle sales there are down by about half year on year.

Source: The Financial Times