Britain’s £320m gift to its car manufacturing rivals

Some 86 per cent of the vehicles registered under the scheme so far have been
made abroad, and a generous estimate of the value of engines and other
components made in the UK that find their way back here via foreign
assembled cars and vans would still mean about £8 out of every £10 spent by
the Treasury goes abroad. By the time the full £400m has been disbursed,
some £320m will have gone to subsidise foreign car workers’ jobs, and just
£80m will have stayed in the UK.

The most spectacular contrast is between the £20m of taxpayers’ money that has
gone to the Hyundai/Kia combine, based in South Korea and which has no
manufacturing, design or engineering presence in the UK; and the miniscule
£241,000 that Jaguar and Land Rover have received, as a result of the sale
of 52 Jaguar cars and 189 Land Rovers. Perhaps most poignant of all is the
mere £22,000 that has gone to the Chinese-owned remnant of MG Rover at
Longbridge, the last vestige of our old indigenously owned motor industry.
Mini did better, with £1.5m, and Japanese makers such as Nissan, Toyota and
Honda as well as Vauxhall also saw some cash.

Mike Steventon, from KPMG, points out: “The scrappage scheme in the UK
has provided a much needed boost for car dealers, but has done very little
to support UK manufacturing jobs. The vast majority of cars sold under the
scrappage scheme are imported cars with the big winner Hyundai and Kia.

“UK car manufacturing is primarily focused on higher value, prestige
brands and over 70 per cent of UK manufactured cars are exported. The
scrappage scheme has provided a boost for smaller, low cost cars which are
principally imported. Indeed approximately 90 per cent of cars sold under
the scrappage scheme are imported and, as such, the scheme has done very
little for UK manufacturing jobs.”

The outstanding impact of the British cash for clunkers plan ? and the German
scheme too, where similar complaints have been heard ? has been to propel
Hyundai and Kia, once marginal brands in the British market place, into the
premier league, at least temporarily, specialising as they do in the sort of
value for money, cheaper products that are overwhelmingly the choice of
scrappage scheme customers. Hyundai outsold Ford to top the retail sales
charts in August (that is excluding company and fleet sales), which gave it
a record market share of 5.6 per cent. Hyundai saw total sales up by 323 per
cent on the year.

The Indian-made Hyundai i10 city car overtook the Vauxhall Corsa (made in
Spain) to become the third best-seller in Britain, and the number one model
among private buyers, an astonishing performance, and also a telling
indicator of the coming industrial challenge from India.

“We are well on the way to making September the best ever month for sales
in the company’s history,” said Hyundai UK’s managing director, Tony
Whitehorn. “Our dealers have taken on an average of 20 per cent more
staff to cope with demand.”

Announcing the extension of the scheme to the Labour Party Conference on
Monday, the Business Secretary, Lord Mandelson, said: “Our car
scrappage scheme has been so successful the money is running out …so I am
extending our popular car scrappage scheme with extra money for an
additional 100,000 cars and vans. In support of our car industry too, this
Government will stand behind Vauxhall workers in Ellesmere Port and Luton
where the workforce themselves have been the main driver of change. And the
same goes for Jaguar Land Rover too.”

He relaxed the rules on the scrappage scheme for vans, raising the
qualification criteria from 10-year-old to eight-year-old vans. That may be
a reaction to the fact that only 25 Vauxhall Vivaro vans, made in the
threatened Luton plant, have been bought under the scheme; plus another
small number of Renault and Nissan badged versions. Only 200 extra Ford
Transits, made in Southampton, have been bought.

Although the British car industry will also benefit to some extent from the
scrappage schemes operating in France, Germany and elsewhere, the boost is
again likely to be minimal. The British motor industry’s problem is that
relatively few of the type of smaller, cheaper cars usually purchased under
these schemes are manufactured here, with only the Nissan Micra and Note and
the Mini coming close. A “Buy British” clause would have run foul
of EU competition rules, but critics say the funds might have been better
spent on encouraging UK based firms to introduce green technology, as with
the recent government grant to develop the LRX, the “Green Range Rover”,
or on the type of loan guarantees offered by Chancellor Angela Merkel’s
government in its successful attempt to protect threatened Opel jobs in
Germany. President Nicolas Sarkozy ordered his nation’s car makers not to
spend a single euro outside France.

Still, hard-pressed UK makers are still grateful for the help the Government
is offering. Trevor Mann, senior vice president for manufacturing at Nissan,
said: “Demand generated through the UK scheme and similar initiatives
across Europe has allowed Sunderland to re-hire 350 manufacturing staff on
temporary contracts.”

The scrappage plan, launched in May offers a £2,000 discount on new vehicles
when they trade in vehicles that are more than 10 years old. It had £300m in
funding, equating to 300,000 registrations. Of the £2,000, £1,000 comes from
the car companies and £1,000 from the Treasury, who recoup some of the
funding through VAT receipts. Around 100,000 cars have already been
registered, and 227,000 ordered from dealers.

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