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Insights into UK manufacturing

Cash-for-clunkers withdrawal

Jeegar Kakkad September 28, 2009 13:51

With the UK scrappage scheme to be extended, one obvious question is what would have happened if it hadn't been extended.

Of course now we'll never know, but we might get some insight from the US. The $3bn cash-for-clunkers scheme only lasted one month in the US. When the incentives were in full swing, over 14.1 million new cars were registered (at a seasonally annual adjusted rate). The figure, an industry benchmark, hadn’t exceeded 10 million in 2009 until the incentive program began in July. Between 2000-2007, annual average car sales were 16.8 million.

The September car sales numbers are due out on Thursday. What will happen to car sales then?

Well, if the 16.8 million figure reflects a bloated industry, then a leaner one would probably produce around 12-15 million cars per year.

I'm betting the numbers fall, but not by as much as people expect. The pessimists are looking for growth to be around 8-9 million. I'm guessing you'll get around 10 million this month, and maybe a 7-8 million rate in September.

But does that mean the US scrappage scheme should have been extended? No, but dealers and manufacturers will suffer a fairly sharp autumn hangover after the heady days of summer.

 

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