Recession - Stimulating the car industry

graking100

Notwithstanding the ecological benefits of allowing the motor industry to fade into oblivion, it is not in the UK's economic interest to allow the UK "branches" to fall by the wayside. So rather than pump billions into these factories for dubious green development, how about the following for stimulating demand:

For 2 years only

1. Withdraw all vat from personal car leasing schemes. As sales are now so low, this will cost the Govt very little.

2. Allow up to 50% of the annual cost to be offset against personal income tax liability. Grade tax relief according to engine size eg 50% if low emission levels and 30% if highest.

3. Government gives a financial contribution of say 10% of lease deposit - payable to the leasing company.

Generali

graking100 wrote: »

Notwithstanding the ecological benefits of allowing the motor industry to fade into oblivion, it is not in the UK's economic interest to allow the UK "branches" to fall by the wayside. So rather than pump billions into these factories for dubious green development, how about the following for stimulating demand:

For 2 years only

1. Withdraw all vat from personal car leasing schemes. As sales are now so low, this will cost the Govt very little.

2. Allow up to 50% of the annual cost to be offset against personal income tax liability. Grade tax relief according to engine size eg 50% if low emission levels and 30% if highest.

3. Government gives a financial contribution of say 10% of lease deposit - payable to the leasing company.

The problem isn't people don't want to buy cars or even that they can't afford to borrow to buy a new car. It's that they're terrified about what the future holds.

Why would you take on a £200/month commitment if you fear you'll lose your job in the next few months?

That's the problem (for now) that needs to be solved and it can't be because the fears are based in reality. Look at how unemployment rates are rising across the world.

handful

Surely better to adopt the policy that other countries are, pay people say £1000 or £2000 to scrap old or environmentally unfriendly cars to put towards the cost of a new car?

Generali

handful wrote: »

Surely better to adopt the policy that other countries are, pay people say £1000 or £2000 to scrap old or environmentally unfriendly cars to put towards the cost of a new car?

You don't solve the problem by making the monthly payments £180 rather than £200.

handful

Generali wrote: »

You don't solve the problem by making the monthly payments £180 rather than £200.

True, but you never take all of the problem or risk away. The idea is to tempt a few to take the plunge and help to keep the industry afloat. At least this way the cost of the aid is in direct relation to the benefit it creates for the industry, better than just handing over wads of cash to keep people employed for doing nothing.

Also, look at the savings in fuel / maintenance etc with a new economical car and suddenly the deal starts to wash it's face.

Alan_M_2

It's leasing and PCP that has created a lot of the mess that the car makers find themselves in. Specifically refinancing the debt of the vehicles ending their agreements with unrealistically high GFV's.

A lot of the lease (or contract hire) deals were subsidised to get numbers flowing - particularly business deals.

We have a couple of Saabs on contract hire deals, the payments are so low that we're paying less than cost price for the car, never mind it being interest free (really, it would have cost more to have paid cash in full and bough them outright).

Now these deals were struck up in huge numbers over the last few years and car manufacturers are finding the stock comping back in often worth far less than the GFV. Especially luxury car makers....

It's not as easy as just getting more bums in new car seats, there's a lot more behind the scenes that needs to be dealt with.

Generali

handful wrote: »

True, but you never take all of the problem or risk away. The idea is to tempt a few to take the plunge and help to keep the industry afloat. At least this way the cost of the aid is in direct relation to the benefit it creates for the industry, better than just handing over wads of cash to keep people employed for doing nothing.

Also, look at the savings in fuel / maintenance etc with a new economical car and suddenly the deal starts to wash it's face.

I can see your point but I just can't see how you get past the fundamental problem which Keynes identified which is that when people think they'll lose their jobs, they don't spend money.

I just keeping coming back to the same point which is, 'Don't just do something, stand there!'. These initiatives and so on are just a waste of money.

dealsearcher

So the government pumps our money into the banks to encourage car loans and into the car industry. However the people out there (that's you and me) don't want to buy a new car because we are worried about loss of income from our job and from our savings. We have a perfectly good 3 year old car which is still going well. So what's the point?

Maybe the government should get out there in the real world of real people and not have some Lord (Mandelson) swaning around with the car industry and union bosses.

kennyboy66_2

Generali wrote: »

I can see your point but I just can't see how you get past the fundamental problem which Keynes identified which is that when people think they'll lose their jobs, they don't spend money.

I just keeping coming back to the same point which is, 'Don't just do something, stand there!'. These initiatives and so on are just a waste of money.

A scrapage scheme would "work" in the sense that it would generate additional new sales, probably 200k-300k extra units in a year (at say £2k per scrapper).

Whether that would be good use of £400 - £600 million is a different matter altogether.

Some of the additional sales would be imports so we would be spending our tax money to keep French / German / Italian workers in a job - although perhaps not as many now sterling has tanked.

The rumours that this is a possibility certainly makes me delay replacing my car which is 10 years old & done 165k miles.

How gutted would I feel to buy a new car only to find I had missed out on a freebie.

Politicians would be better off advised to pass no new laws for the next 5 years, but just repeal bureacratic legislation and deterimine that the state should simply do less.

ninky_2

graking100 wrote: »

the ecological benefits of allowing the motor industry to fade into oblivion. quote]

are massive.

why do laissez-faire economists start baying for state intervention when their customer base disappears?

piggeh

It might boost it by 200-300k units a year, but are you not simply creating an artificial level of demand? How have these companies proven that they can survive on sustained levels of demand 20-30% lower than they were before the credit crunch kicked in? Most have laid off staff to reduce costs, it's not really a sustainable way to operate in the long term. They need to give solid proposals how they expect to make a profit on 'normal' levels, not levels inflated by government subsidies.