Scrappage continues to drive car sales but tougher times are ahead

In November, new car registrations were up 57.6%, albeit on a weak 2008, to 158,082 units – in line with November 2007 volumes. Year-to-date registrations remain down 8.8% at 1,844,063 units but the full year count is now likely to exceed 1.975 million units. Business, fleet and private sales all increased in the month with private up 141.2%, with the scrappage scheme accounting for 21.6% of all new car registrations in November. Paul Everitt (pictured), chief executive of the Society of Motor Manufacturers and Traders (SMMT), said: "The increase in new car registrations in November reflects the positive impact of the scrappage incentive scheme, customers avoiding the VAT increase in January and the very difficult conditions we experienced a year ago." SMMT is urging government to use its pre-budget report to sustain the recovery and generate business confidence by stimulating demand in key parts of the new vehicle market." David Raistrick, UK Manufacturing Leader at the business advisory firm Deloitte warned that despite the positive news, the automotive industry should not lose sight of the challenges that were ahead in 2010. He went on: "Within a short period of time early next year we will see the scrappage scheme end and the VAT rate return to 17.5%. We may also see interest rates increase next year. Furthermore, car manufacturers may find themselves needing to implement price rises due to the low value of sterling increasing the cost of imported cars and parts. The automotive sector must be prepared to deal with these challenges in order to ensure a long lasting recovery." Sue Robinson, director of the Retail Motor Industry Federation (RMI), said that she did "have a slight concern that 2010 could be a more difficult year with the scrappage scheme ending, VAT rising and possible restrained public spending".