Scrappage scheme may fail to rev up British car makers

A scrappage scheme offering motorists up to £6,000 to trade in old petrol or diesel cars

A scrappage scheme offering motorists up to £6,000 to trade in old petrol or diesel cars for a new electric vehicle would do little to bolster British carmakers, experts have warned.

The plan, which is being considered by Prime Minister Boris Johnson as he seeks to rev up the automotive industry following a lockdown sales collapse and a run of redundancies, would do little to help the UK’s biggest carmaker Jaguar Land Rover.

JLR’s only all-electric car, the I-Pace, is built in Austria by contract manufacturer Magna, meaning pumping UK state funds into the proposal would do little to save British jobs.

The firm has about 40,000 UK staff and is planning to build electric versions of its Jaguar saloons at a plant in Castle Bromwich in the West Midlands, but the first of these will not come until next year. The crisis in the industry could derail the project altogether if JLR is forced into severe cost cuts.

Ian Henry, of data firm AutoAnalysis, said: “We won’t see the first electric Jaguar – the XJ – out of Castle Bromwich until next year at the earliest. Any impact on volumes from an incentive would have little impact on JLR in the near term.”  

Jaguar’s saloons sell in small numbers, meaning the boost would be limited even if it was able to rush an electric version into production. Last year the company sold just 61,000 saloons of all models worldwide.

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JLR is electrifying its entire range but bigger selling battery-powered versions of Land Rover models are only slowly entering its line-up, with the first expected in 2021. 

A spokesman for JLR called on the Government to offer subsidies to conventionally fuelled vehicles as well as electric and hybrid models.

The only other mainstream all-electric cars built in the UK are Nissan’s Leaf, which is produced at Sunderland, and the new electric Mini, which is built in the BMW-owned plant in Oxford.

The Leaf represented just over 10pc of the 345,000 cars made at the Japanese company’s UK factory last year, though an electric version of the bestselling Qashqai is expected next year. The electric Mini makes up a similar proportion of the roughly 220,000 cars built at Oxford annually.

Professor David Bailey, a car industry expert at Birmingham University, added: “To what extent a scrappage scheme helps UK auto manufacturing depends in large part on how it is set up.

“A scheme that only supports battery electric vehicles will only benefit Nissan’s Leaf at Sunderland and small scale electric Mini production at Oxford.”

He added that an incentive scheme which supported plug-in and hybrid vehicles that have both engines and batteries could deliver a bigger boost, with more of these cars built in the UK.

JLR builds some hybrid Land Rovers in the UK, and Toyota’s plant in Derbyshire makes hybrid Corolla models.

Germany’s electric car subsidies

Any attempt by the Government to focus support on UK-built cars could fall foul of World Trade Organisation and European Union rules on state aid, legal experts warned.

Mr Henry said: “Limited production of electric cars here means any impact of a subsidy would be marginal at best and non-existent at worst.”

He suggested that ordering all public bodies to source new vehicles from Britain would be a more effective ay of propping up the industry.

The Society of Motor Manufacturers and Traders said that ministers should not confuse the need for short-term measures to restart the industry with efforts to boost electric car making, which need to be considered over a longer time frame.

The industry trade body has repeatedly called for measures that support the entire market rather than just electric vehicles, which represent only 3.6pc of the UK automotive sector’s production.