12 May 2010

Comment: Welcome upshift in car business

With over 51,000 cars sold in the first four months of the year, not a long drive from the totality of last year's dismal performance, there are tentative smiles appearing in car showrooms around the country.

Scrappage is the buzz phrase, but in fact the best figures so far show that quite a small percentage of those sales are related to the scrappage offers. Under 5,000 of the total, perhaps. Which in one way is good news.

Good because it means that the bulk of buyers are doing it with 'real' money rather than the virtual incentives of scrappage. Incentives that are paid for by the taxpayer and by the already-depleted margins of dealers and distributors. Not that we have that much sympathy for either, because when the nation was living high on the hog, both state and motor trade were doing very well at the buyers' expense.

Still, the upshift begs a question. If it isn't scrappage, where is the business coming from?

Well, a couple of possibilities come to mind. First, there's a pent-up cohort of motorists out there who put off changing their cars in the last year or two. Not because they couldn't afford to, but because they were worried about whether the economy would go bust. Maybe it still will, but they've decided to get on with life anyhow.

Also, there's a dearth of good used cars out there because of last year's poor sales, so prices for trade-ins are up. Put that against fairly competitive discounts even outside the scrappage scheme and the cost of change is considerably less than it might otherwise have been.

And finally, a number of car companies are fortunate enough to have their own financial arm, and a good pot of money in it. So, where the banks are not being givish at all at the moment, those particular brands are doing much better.

And the scrappage? Well, even if numbers are low, they do give prospective customers a legitimate reason to go into showrooms. And if they do buy outside the scheme, it's between themselves and their dealer. In the times that are in it, they have an excuse to sport a 10 plate.

Whatever, it all helps to pull us out of our gloom. BB