UPDATE: UK New-Car Registrations Rise For Third Month
06 October 2009 - 8:49PM
Dow Jones News
U.K. new-car registrations rose for the third consecutive month
in September as the government's car-scrapping scheme continued to
bolster sales.
Registrations - a measure of sales - rose 11.4% on the year in
September to 367,929 vehicles, compared with a 6% rise in August
and a 2.4% rise in July, according to data from the Society for
Motor Manufacturers and Traders.
September is one of the most important months for U.K. car sales
because it marks one of the twice-yearly changes in car
registration plates.
"Market conditions remain challenging with demand being
underpinned by the extremely successful scrappage incentive
scheme,β SMMT Chief Executive Paul Everitt said.
The U.K. scrappage plan, which came into effect May 18, mirrors
similar plans in other Western European markets. It offers car
owners a GBP2,000 discount on new vehicles when they trade in
vehicles that are more than 10 years old. The cost of the discount
is split equally between the government and car manufacturers.
Demand for new cars had plummeted in the U.K. before the scheme
was implemented, due to the deepening recession. New-car
registrations for the first nine months of this year are still down
15% on the year-earlier period at 1.52 million vehicles.
The U.K. government initially set a budget of GBP300 million for
the scheme, meaning that up to 300,000 vehicles could be purchased.
However, the success of the scheme meant that the money was set to
run out this month, and the government last week added another
GBP100 million to the scheme, enough to fund a further 100,000
vehicle sales. At that time, it said some 227,000 vehicles had been
ordered so far under the initiative.
βThe extension of the scheme will help to sustain demand through
the latter part of this year and into 2010. This will allow
economic recovery to strengthen and safeguard valuable industrial
capability,β Everitt said.
Despite the extension of the plan, market experts and car
executives are concerned that demand will collapse again when the
scheme ends. The economy remains fragile, with unemployment on the
rise and taxes set to increase in coming years as the government
looks to cut debt. Additionally, the U.K.'s sales tax - value added
tax - is set to rise at the start of 2010. The U.K. government cut
the tax to 15%, from 17.5%, for 2009, but it will revert to the
previous level.
"We need to be cautious when looking towards prospects for
2010," said Keith Parry of Barclays Commercial Bank. "The ending of
the scrappage scheme in February at the latest and the VAT increase
at the start of the year could leave the sector without any support
at a time when there are likely to be increasing pressures on
consumer spending on big ticket items.β
For the time being, Ford Motor Co. (F) and Hyundai Motor Co.
(005380.SE) continue to be among those most benefiting from the
U.K. scrapping scheme. Ford, the biggest seller of cars in the
U.K., saw sales rise 22% to 54,553 vehicles, while Hyundai sales
more than doubled to 11,031. Both manufacturers sell small models
with low CO2 emissions that meet the conditions of the scrapping
scheme.
Other volume manufacturers like Fiat SpA (F.MI), Honda Motor Co.
(HMC) and Volkswagen AG (VOW.XE) also posted growth.
However, Vauxhall, whose brand has been tarnished by the
bankruptcy filing in the U.S. of parent General Motors Co. and a
protracted sales process that has yet to be finalized, saw its
sales drop 3.5% year-on-year to 41,255 vehicles and its market
share fall to 7.6% from 8.2%.
-By Steve McGrath, Dow Jones Newswires; 44-20-7842-9284;
steve.mcgrath@dowjones.com