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Calls for scrappage scheme to revive Australian new car market

By Tom Fraser, 23 May 2020 Car News

Wrecked cars

‘Cash for clunkers’ stimulus package could go a long way towards improving local new car sales

Last month’s Australian new car sales plummeted almost 50 percent compared with the same period last year - the single worst decline in new car sales ever recorded by the Federal Chamber of Automotive Industries (FCAI).

Year-to-date sales are down 20.9 percent on last year and, while the FCAI is showing “cautious optimism” of better times ahead after restrictions ease, the Australian car industry, which employs upwards of 65,000 people, still hangs in the balance. 

Of course, it’s not just Australia that’s experiencing massive downturns in new car sales. European sales fell a whopping 76.3 percent year-on-year in April, which has led to UK car industry bosses calling for change.

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The British automotive industry is putting an increasing amount of pressure on the UK government to provide a stimulus to get sales back to where they should be.

Ford of Britain boss Andy Barratt told ITV News that stimulus package may take the form of ‘cash for clunker’ scheme in which car buyers are given incentives to scrap their old car, in favour of a grant towards a new, more economical and efficient car.

“Without a doubt, some sort of stimulus is really needed to get the car business moving in the UK,” said Barratt.

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International solutions

It's not a new idea for the UK, which first introduced a similar scheme a decade ago, handing out £2,000 (A$3736) payments at a cost of £300,000,000 (A$558,758,789) to the government. That time, it was to refresh the national carpark with cleaner, safer cars.

New car dealership

A cash for clunker-type scheme was also floated in Australia around the same time by then Prime Minister, Julia Gillard. The aim was to reduce carbon emissions by supplying buyers with a $2000 credit towards a new, more efficient car.

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Now though, the strategy is being repurposed to stimulate spending in the car market rather than cutting down on emissions.

Asked about the viability of such a scheme being introduced in Australia, FCAI director of public affairs Lenore Fletcher said the ‘cash for clunkers’ idea has been discussed locally.

coronavirus hits car industry

“[The FCAI] has been very active in this time in terms of continuing engagement with dealers and the government, and there’s been a lot of discussion about what could happen in terms of stimulation during this period. That [cash for clunker scheme] is certainly one that has come up.”

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“A ‘cash for clunkers’ scheme is something that we would support but more detail is needed. We’re certainly willing to discuss that with authorities.” 

First and foremost though, the FCAI says its most interested in simply getting people back through the dealership doors. 

“There’s been lots of discussion with members and the chamber itself, the key point is prioritising health issues and ensuring consumer confidence is boosted.”

Risk-averse approach to lending is hurting new-car sales

Restrictions on mobility were the main concerns of consumers, but now things are easing the FCAI is also hoping incentives like the instant asset write off package will get people back into showrooms.

Read next: Australian economic stimulus asset write off increased

“It’s encouraging [that Australia] has taken care of the COVID-19 health crisis well in comparison to a lot of other countries and we’re not sure how long things will take to fully improve but we’re showing cautious optimism going forward.”

It is understood that India too, is in the midst of organising a scrappage scheme, aimed at ridding its roads of polluting cars by scrapping instead of heaping old, tired vehicles back into the used car market. India’s used cars generally have extremely low resale values, so the government would step in and provide a payment in order to assist buyers.

If nothing else, a similar scheme could go a long way toward improving things locally. Hopefully last month’s nightmare sales result was the lowest point and we’re on our way back up for the remainder of 2020.