MTA proposes scrappage scheme
BY DAVID HASSALL | 23rd Mar 2009
The MTA NSW has asked the federal government to pay new-car buyers up to $3000 in return for crushing a car more than 10 years old.
Similar schemes in Germany, France and Brazil have already resulted in increased new-car sales, as well as environmental and safety benefits, and the United States is considering its own “cash for clunkers” scheme.
MTA NSW chief executive James McCall said its scrappage scheme was intended to rid Australia of polluting, unsafe cars while providing a much-needed boost to the struggling car industry.
He said the organisation had written to federal treasurer Wayne Swan explaining the benefits of the initiative, while the national body (MTAA) has commissioned think tank Access Economics to produce economic modelling on the costs.
“We are not specifying ‘buy Australian’ or anything else – we need to help the (whole) industry, including 103,000 small businesses that make a living from the car industry and 318,000 workers,” said Mr McCall.
MTAA figures show that half of Australia’s 15 million vehicles are more than 10 years old and that about two million of those are worth less than $3000.
While the Western Europe new car market dropped about 20 per cent in February, the German market picked up 21.5 per cent after introducing a scrappage incentive.
Although the French government’s incentive is smaller – about $1800 compared with almost $5000 in Germany – it has already resulted in Renault increasing production at two of its plants.
Renault will boost production of the old-generation Clio II at its Flins plant near Paris, enabling its Novo Mesto factory in Slovenia to increase output of the smaller Twingo city car.
Clio II, which is sold in France as the Campus, is built alongside the new-generation Clio III at Flins.
With a sudden demand in Germany for its fifth-generation Polo light car, which was launched on March 5, Volkswagen has abandoned a planned extended closure of its Uitenhage plant in South Africa over Easter and will now build an extra 6000 Polos.
In the US, congress has been presented with a bill that would give consumers between $4300 and $7200 in exchange for scrapping cars at least eight years old, provided the new replacement car has better fuel consumption.
Although the bill was proposed by a ruling Democrat and is supported by GM, Ford, Chrysler and the United Auto Workers union, the Alliance of Automobile Manufacturers opposes it as written.
Federal Chamber of Automotive Industries CEO Andrew McKellar told GoAuto two weeks ago it was investigating the potential effectiveness of a scrappage scheme in Australia, but warned that other proposals need to be realised before a firm scrappage scheme was put before the government.
The MTA, which represents dealers rather than manufacturers and importers, proposes that once an old car is destroyed, the owner would get a certificate to be presented at a dealership to receive $3000 off a new car.
“The key is the grant has to be at least equal to what the owner would get if they traded it,” said Mr McCall.
“Our submission asks the government to set aside a maximum of $4.5 billion, spread over three years, which will be plenty to cover the cost.
“But it’s not just a one-way street. In addition to saving jobs, which is ultimately good for the economy, the government will get 10 per cent GST on the new car sales.”