Scrappage scheme could see more petrol and diesel cars replaced by EVs with £6k incentive

Tags: #government-ev-policies

The economic crash of 2008 saw the implementation of UK's first scrappage scheme in which paid £2000 for an old car against the purchase of a new one. Now, in the wake of the COVID-19 crisis and the biggest slump in car sales in decades, the government is considering a new scheme. However, this time it'll support low and zero emissions vehicles.

Off the back of the enormous slump in car sales during the Coronavirus crisis and continuing consumer uncertainty, the government is considering offering up to £6000 for buyers to swap their petrol or diesel for an electrified model.

The original scrappage scheme was hugely successful. During the 10 months of the scheme around 400,000 new cars were bought, replacing vehicles of more than 10 years old. This also meant 400,000 older, more polluting cars were taken off the road and, under the terms of the scheme, could never be put back onto it – which saw a cull of some historically significant cars, but that's another story.

To give some context as to the dire straits in which the automotive industry finds itself, manufacturing has fallen through the floor and in April overall car sales dropped to 1946 levels, with a total of 4321 new cars registered – a 97.3 per cent year-on-year drop. Such was the slump that for the first time in history in the UK, an EV topped the best seller chart, with 658 Tesla Model 3s registered. May wasn't much better, with sales down 90 per cent vs. last year.

So, six grand you say?

Details of the plan haven't been fully reported yet, and there have been some murmurings that the government might even do a U-turn before it's even come in. However, were it to be implemented the headline figure is that 'up to' £6000 will be offered to buyers getting rid of a petrol or diesel model for an electrified car.

The assumption is that in terms of financial incentives to buyers, the scheme will echo what the French and German governments are doing. In Germany, a £115bn stimulus package is set to double the incentives on EVs, potentially knocking £8000 off the list price of one that would usually cost £35,500. A wider EU stimulus package has also been reported which could exempt EVs from VAT, knocking anything from 15 to 20 per cent off the list price depending on the market.

Our best guess is that here in the UK the government would go down a blanket payment scheme like the original scrappage programme, with £6000 being offered when a petrol or diesel car is exchanged for a pure EV and somewhere in the region of £3000 offered against a PHEV. This would represent a doubling of the current government incentive on EVs and the reinstating of a cash incentive for PHEVs.

Is there an appetite for scrappage?

Yes, there very much is among consumers and the industry. What Car? surveyed 6632 in-market car buyers (that is to say those actively looking) and found that almost a third was holding off on making a purchase in case a scrappage scheme gets introduced. Furthermore, its research suggests that buyers are more brand promiscuous in their decisions, with a fifth having changed the brand they're considering since lockdown started.

However, where the What Car? research falls down is that it doesn't establish whether those in-market consumers are likely to buy an EV when that final purchase decision needs to be made. Nonetheless, Editor Steve Huntingford is confident in the potential for success: “A Government-backed initiative to encourage motorists to trade-in older, higher-polluting models could provide a welcome boost to the industry – just as the Scrappage Scheme did in 2009 after the previous year’s financial crisis.”

Industry body, the BVRLA is supportive of the idea, but is calling for the scheme to be extended to used EVs as well as new ones to increase buyer options and the potential for its members to benefit.

BVRLA Chief Executive, Garry Keaney, said: “To be truly effective, any EV stimulus scheme must work for both the new and used market.

“It should make the UK a more attractive market for OEMs to sell their EVs and help those who cannot afford to buy a new electric car to purchase or lease a used one. Any scheme that focuses solely on supporting new vehicle sales could damage the residual values of ex-fleet cars and thus hinder the sector’s ability to invest in new electric vehicles.”

Discover EV's take

If there's going to be an announcement of the introduction of a scrappage scheme, it'll come on July 6, but reports have come out suggesting that the government is reconsidering how to wield the treasury's might to stimulate the economy.

In our view, a scrappage scheme that makes EVs more affordable achieves four main aims; it gets the car market going again, does so in an environmentally sound way, expedites the cull of petrol and diesel cars, and enables more people to buy an EV which they may otherwise have not been able to do. The only counter-argument is that taking viable vehicles off the road is wasteful. However, if they are being replaced by zero emissions-capable models, the benefits clearly outweigh the costs.