Would you buy a new car if the Government gave you £2000 to do it? In Germany that’s roughly what you get, provided you scrap one that’s over nine years old. It has meant sales of small cars over there are surging, despite the economic crash. So you won’t be surprised to learn that dealers here are lobbying for something similar. Bad idea.
Look at it this way. If you could see that there’s all this lobbying for a £2000 bung sometime soon, would you buy a car now? Nope. You’d wait. So by making all this noise about the need for an incentive to get things moving, the industry has in fact ground to a halt. Which sounds like an own goal.
Anyway, why would a scheme like this do our car plants much good? After all, it’s all about cheap small cars, and apart from the Mini (not cheap) and Micra (not a big player) small cars aren’t made in Britain. Jaguar and Land Rover sales won’t get much of a bounce. Nor, likely will even the Civics and CRVs from Swindon, Aurises from Burnaston and Astras from Ellesmere Port.
Then if the incentive is introduced, and if sales surge as a result, where will we be? Well, for sure the overall average CO2 output of cars on the road will fall, as big old smokers get traded for squeaky-clean new tiddlers. That green angle is how the Government will sell the scheme to the public, by the way.
But the car market will have been distorted. All those small cars bought under the scheme will be worth a lot less when they’re sold secondhand. First because they will suddenly be in surplus. Also they will have been bought at a lower price, so that’s bound to suppress their worth.
And when the subsidy stops, new-car demand will falter again. What a mess.
Anyway, as the scheme goes on, I don’t expect you will actually get a car for £2000 less. Because dealers will stop giving such good discounts as they do now. Or they’ll give you less for your trade-in. They’ll want to get what they perceive as ‘their share’ of the bung from the public purse.
You might also notice that lots of car prices have gone up lately. Could this be the manufacturers are anticipating that the taxpayer will shortly step in and knock them down again. Not that I’m a conspiracy theorist or anything.
It’s the law of unintended consequences and it’s almost inevitable with subsidies. Farm subsidies are a perfect example. Fifty years of farm subsidies didn’t make farmers richer. They just enabled supermarket buyers to push down the real prices they paid to farmers while the subsidies took up the slack. So the true beneficiaries of all that taxpayers’ money were the supermarket shareholders.