Monday’s announcement by the UK’s business secretary Lord Mandelson that the UK scrappage scheme would be extended for a further 100,000 vehicles has been cautiously welcomed by carmakers around the country who were keen to stress that any lift was very much part of a wider European set of initiatives.
Making the announcement at the Labour Party conference taking place in Brighton this week, Lord Mandelson said: “There are encouraging signs that the economy is picking up. But recovery remains fragile and uncertain, especially in manufacturing and one of its cornerstones, the car industry.”
The fragile nature of the recovery seemed to be on the minds of the UK’s carmakers and their LSPs.
DHL Supply Chain's head of automotive, Paul Dyer, welcomed the extension but told Automotive Logistics: "The automotive sector is still very fragile, with OEMs, tier one and tier two suppliers struggling to secure sustainable markets for their products. Clearly, the ongoing challenges faced by the likes of Vauxhall at Ellesmere Port and Luton, and Jaguar Land Rover at its Midlands plants, show that the industry is still in need of support."
He went on: "From a supply chain perspective, this ongoing initiative is welcome news, as many OEMs are still in the midst of efficiency programmes and a further deterioration in the market would have dealt another blow to the sector."
For Toyota in the UK, the scrappage scheme has led to what was described as a “slight increase in production” at the company’s Burnaston plant in August and September, also linked to European incentives given that Toyota exports more vehicles than it imports.
Company spokesman David Crouch said the company was cautious in its response and stressed that the extension was not “the ultimate silver lining” given the state the industry remained in. From October Toyota is still planning to return to a workshare production set up at Burnaston, which will be reflected in output and logistics activity. That said, Crouch affirmed: “We will be seeing an increase in vehicle activity as a result of the scheme, which has all been very positive for us and it is very good news that the scheme is being further extended.”
The £300m scheme, which has already covered 200,000 of an original 300,000 limit, is now likely to make it into the new year. In addition, it has now been modified by six months to include any vehicle registered before 29 February 2000, but has simultaneously seen the minimum age of vans being scrapped cut from 10 years to eight. The scheme is now expected to cost a total of £400m.
According to Honda UK, which next week begins production of its popular Jazz model at its Swindon plant, it has been a boost for dealers. “The extra showroom traffic that scrappage has led to has benefited us,” said spokesman Steve Kirk. “We’ve sold a lot of Jazz, it’s been the most popular car by far. About 70% of the cars we’ve sold through scrappage have been the Jazz. The other big benefit to us is that about 85% of the cars we’ve sold through scrappage have been sold to customers new to Honda.”
This has in turn meant more business for the company’s LSPs but the company doesn’t expect to alter its logistics arrangements once Jazz production begins at Swindon said Kirk. Up until now the company has been in importing the Jazz model from Japan.
Lord Mandelson’s announcement was also welcomed by logistics suppliers that have benefited so far. Eukor, which helped deliver 10,000 Hyundai i10, i20 and i30 models through the Port of Tilbury between July and August, welcomed the initiative. Spokesman Espen Hofland said the scheme offered the chance of volume increases in Europe which it would support through its shipments, including those from Chennai. Hyundai, which operates its own dedicated vehicle processing centre at the Port of Tilbury, saw its sales figures overtake Ford and Vauxhall in August, with the i10 overtaking the Corsa to become the third best selling vehicle in the UK. The company has extended temporary contracts at the VPC to ensure vehicles reach customers quickly said Hyundai UK spokeswoman Jodie Gooding, adding: "We are delighted the scheme has been extended."
The German incentive scheme, which saw the biggest jump in registrations under scrappage at 28%, ran out of its allocated €5 billion over three weeks ago, while France and Italy are still considering the extension of the schemes they have in place. Industry figures fear a sharp drop in demand when the schemes end with a dramatic impact on production and supply. This was emphasised this week by Fiat’s CEO Sergio Marchionne who called for a gradual phasing out of the incentive schemes, with adjustments being made in line with market recovery.
