Scrappage incentive hits trouble on Day One

The UK's scrappage scheme started today (18 May) but not without problems as Ford and Honda delayed their involvement concerned there were matters still unresolved.
 
Ford suspended deliveries of vehicles to dealers and Honda told dealers not to register any cars under the scheme. Both companies have concerns over value added tax (VAT) arrangements.
 
Both companies said they were committed to the scheme but Honda said it wanted clarity over the GBP1,000 (EUR1,500) contribution from car companies. It planned to split this with dealers but has been told it cannot do this because of issues involved in splitting the VAT element.
 
A spokesman said manufacturers alone have to make up the payment and Honda is challenging this.
 
Ford told BBC News: "Based on details which have only become apparent late in these negotiations [between the government and manufacturers], Ford is working to resolve some outstanding administrative issues."
 
The Society of Motor Manufacturers and Traders (SMMT) said it was also seeking to clarify the tax position.
 
From today cars that are more than 10 years old can now be scrapped in return for a GBP2,000 discount on a new model. The government will subsidise GBP1,000 while carmakers contribute the balance
 
The government set aside GBP300m (US$456m) for the scheme which will run until the end of next March, or until the money runs out. Although the government and some car companies have said that scheme could boost the market by 10%, or 200,000 vehicles, this year some critics say it is not generous enough and does nothing to encourage the take-up of low emission cars.
 
Most carmakers have signed up to the UK scheme. Similar initiatives have already seen sales increases, or have slowed declines, in other countries, particularly in Germany where the scrappage scheme boosted new car sales 40% last March.
 
UK new car sales were down 28.5% in the first four months of 2009 compared with the previous year.
Source: just-auto.com editorial team

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