Who wants to sell you a car with the spiel: 'Bargain!'

Published on Friday 29 May 2009 22:24

BUSINESS Secretary Lord Mandelson yesterday attempted to spark a rush in new car sales by warning drivers that a £2,000 subsidy to replace decade-old vehicles was running out fast.

More than 35,000 cars have been ordered through the scheme since the UK government announced in last month's Budget that it would offer a 1,000 subsidy – which is then doubled by manufacturers – to encourage the replacement of vehicles ten years or older.

This means around one in five purchases is benefiting from the reduction, which copied a scheme first introduced in Germany to revitalise a key industry badly hit by the recession.

However, with the government having set aside 300 million to fund the scheme, and sales down around 25 per cent year on year in the UK, there was every sign that the offer would last until the official end date of next March.

The motor industry said that while the scheme had enjoyed a "very encouraging" start since going live on 18 May, it would take several months to assess its impact. Lord Mandelson and Prime Minster Gordon Brown were nevertheless keen to portray the "scrappage" initiative as a success and invited six new buyers to Downing Street.

Encouraging drivers to sign up for the scheme, Lord Mandelson said: "The whole scheme seems to have got off to a flying start – 35,000 orders have been placed since the scheme was introduced, that's a great boost to car manufacturers in Britain, and a great bargain for car consumers as well.

"All round, plus the boost to the advertising industry, it seems to be winning.

"I just say to people though, it is time-limited, it's first come, first served. So if they don't want to be disappointed, get your orders in soon."

Mr Brown added: "This scheme not only helps hard-pressed consumers, it also helps protect British jobs by stimulating demand for new cars."

The formal roll-out got off to a chaotic start when Ford was among some manufacturers who delayed taking part. However, 38 have since signed up.

A spokesman for the Society of Motor Manufacturers and Traders said: "The motor industry has been encouraged by the positive start to the scrappage incentive scheme.

"But it will be a couple of months before we can really assess the true impact."

AA president Edmund King said the scheme allowed thousands of drivers to buy new, safer and cleaner cars. He said: "We need to keep this policy in mind so we can stimulate the uptake of hybrid/electric vehicles."

Industry figures show there were 133,475 new car sales in April – 24 per cent down on the previous April's total of 175,668. In the first four months of 2009, there were 623,833 sales – 28.5 per cent less than the 859,017 over the same period last year.

This has led to job losses across the industry, including 1,200 posts at Nissan's plant in Sunderland. There are also fears about the future of Vauxhall as a result of the difficulties experienced by its US parent company, General Motors.

Last night, Lord Mandelson said he would be seeking swift confirmation from Magna, the likely saviour of GM Europe, that no Vauxhall jobs would be lost in a deal to keep the car company afloat.

Speaking as talks on a deal continued in Berlin, Lord Mandelson said he understood a shared ownership deal would be reached between Vauxhall owner GM and Magna, a Canadian car parts manufacturer.