Pressure builds in favour of scrappage support
Thu 12 February 2009
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The European Commission has stepped in to encourage support for green-vehicles as part of packages to Europe's recession-hit carmakers.
Responding to a request from member states the European Commission has issued a policy paper setting out an EU framework for state aid and other measures supporting the car industry through the current economic crisis. EU leaders will discuss the paper at an emergency summit on the financial crisis on the 1st March. The paper follows the publication of French proposals for €3Bn of aid for Renault and PSA that was tied to retaining French manufacturing plant and jobs.Several member states, including Sweden, Slovakia and the Czech Republic (who retain the EU Presidency) raised concerns with the proposals. These are expected to be modified to achieve state-aid clearence but are expected to retain a "moral obligation" on the French manufacturers to retain French jobs in return for funding.
The Commission's paper provides guidance on the design of scrappage schemes have been proposed by nine member states. EU industry commissioner Gunter Verheugen said such incentives do not raise state aid concerns "in principle" but should be linked to the green performance of replacement vehicles. Other measures to assist the sector include state aid for research and development of greener technologies, subsidised loans for the production of cleaner cars, and public procurement rules that boost demand for fuel efficient vehicles.
Mr Verheugen said the commission was "committed to defend" the millions of jobs in the automotive sector, supply chain and aftermarket. "We have already identified the needed support and now we have to concentrate on rapid delivery in a coherent way," he said. He promised to co-ordinate efforts with member states and make sure "the broad range of available support tools" was applied effectively. The European Investment Bank was expected to approve €3.8bn of automotive sector projects next month, with a further €6.8bn-worth in the pipeline. "We hope to satisfy the needs of carmakers given that European legislation has decreed the need for investment," he said.
In Italy a used car scrappage scheme provides a €1,500 incentive for people trading in their old vehicle to buy a new one. The French government announced in late 2008 that it would provide a €1,000 bonus for driers scrapping an old car or van and buying a new fuel-efficient replacement in 2009. In January, Germany began a year-long pilot scrappage programme which pays citizens €2,500 if they scrap their old vehicle. In China a stimulus package has been introduced for the auto sector which includes a purchase tax cut and a scrappage incentive. The US Congress is also debating a proposed a 'cash for clunkers' vehicle scrappage incentive to help revive new vehicle sales and clean up the US' existing fleet.
In the UK, the British Vehicle Rental and Leasing Association (BVRLA), the Retail Motor Industry Federation (RMIF) and the Society of Motor Manufacturers and Traders (SMMT) have written to BERR with proposals for scrappage schemes to help boost sales. In January registration figures were down 30% year on year according to the SMMT.
The European automakers' association Acea said too few of the outlined measures had actually been put into place. This was due to "time-consuming procedures and a lack of guidance at EU level," it said. This weekend EU leaders must "give the political message to lift bureaucratic barriers and speed up implementation", Acea added.
However, Brussels-based environmental NGO, T&E, has criticised moves towards the schemes, citing high cost and subsidising car dependency as key failings. T&E Director, Jos Dings, said: "The EU should put very clear limits on these schemes, and at the very least make them applicable only to low-consuming cars."
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