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(Yes, I do know this is incredibly long … but it’s important ok?!!  Get a cuppa and settle down for a read.)

(Linked references are listed at the end of the article.)

 

Bangers and Cash -

Why we should NOT have implemented a scrappage scheme for old cars in the UK

Well, it's finally here. After months of speculation, the Chancellor has announced the details of the scheme 'flogged' to him by the Society of Motor Manufacturers and Traders, The Retail Motor Industry Federation (et al.) for the idea to implement a ‘scrappage’ scheme for old cars. Basically, they wanted the government to use our taxes as a subsidy towards providing £2,000 to those with old cars so that they will scrap their existing vehicle and purchase a brand new one. However, while the media reporting has extensively covered the views of the manufacturers, showing fields full of unsold cars, manufacturing lines at a standstill and talk of corporations ‘going under’, there has been very little balance in the media about why this approach will actually be a really bad move.

After you’ve read this article, you may want to go to the 10 Downing Street website and sign the petition against the calls for scrappage but this must be done before 18th May 2009.
(http://petitions.number10. gov.uk/No-to-Scrappage/)  It’s likely to be a lost cause now but at least someone should give a shot across the bows!

Introduction

Over the last few days, I’ve been trawling around for some facts and figures so as to be able to analyse, more comprehensively, the often unsubstantiated views and opinions that have been put forward as to why we should use our (i.e. taxpayers') money to provide another bailout, this time to large manufacturers who appear to have consistently failed to heed the warnings of impending collapse caused by oversupply of vehicles that are unsuited to a sustainable transport system. The slick advertising sometimes makes it difficult to remember that these companies are out to make money. So are all companies, of course – and there’s nothing inherently wrong with that. The snag is that the way they have chosen to do so has been to carry on, regardless, with their enticements to the great unthinking mass of consumers who have been conditioned into believing that they MUST change their cars every few years and that this is A Good Thing. In practice, it’s a ludicrous way for these companies to have behaved; one which now threatens the livelihood of their employees (and those of companies supplying them) and they are now in a ‘chickens home to roost’ scenario as a result. Alternative technologies do exist to improve, vastly, the energy efficiency and longevity of cars, allowing manufacturers to develop into sustainable car re-builders and upgraders (as well as original manufacturers) rather than organisations that just want you to throw away the perfectly serviceable item you already have so that they can sell you another one at maximum profit for minimum effort. They have chosen not to travel down that path, as it suited them not to do so at the time. Now they are trying to convince everyone that they are merely victims and that they are entitled to our money to help them out.

The Great "Environmental Argument" Scam

The biggest scam going on here is the idea put forward by SMMT, RMIF etc. that scrappage would be environmentally friendly “as big old smokers get traded for squeaky-clean new tiddlers” as one commentator recently put it. The SMMT and government seem to manage to ignore the fact that there have been emissions tests as part of the annual MOT since 1975. A well-maintained car which continues to meet the standards imposed will produce little in the way of pollution, especially bearing in mind that the mileage undertaken by a cherished classic (or even an ageing runabout) is diminishingly trivial by comparison with the latest EuroJap repmobiles that whiz up and down the motorways daily. (See below for annual mileages and proportions of company cars vs private cars.)

The Facts & Figures

So …. To some facts! First, let’s look at the issue of emissions.

Emissions test limits:

1st August 1975 – 31st July 1986  CO 4.5%, HC 1200ppm
1st August 1986 – 31st July 1992   CO 3.5%, HC 1200ppm
1st August 1992 onwards Test as per manufacturer’s original spec (compulsory catalytic converter)

(Ref. Haynes)

Given that we’ve had cats for nearly 17 years (at the time of writing) and that the MOT has required a vehicle since then to meet its manufacturer’s original specification, it should be clear that the significance engendered in the minds of the press (and, hence, public) about this issue by SMMT et al. is tantamount to deliberate misrepresentation. Admittedly, those standards will have toughened over the years but legislation like this can never be retrospective and the average emissions levels will inevitably improve anyway as the manufacturing date of the stock of vehicles moves forward over time.

Now let’s consider the annual mileage travelled:

Company cars: 19,990; Private cars: 8,260

(Ref. DfT table 1884)

Thus, if half the cars sold p.a. are company cars (see below) then with those average figures above, around 70% of the total mileage clocked up p.a. by new cars is from company cars but company cars aren't eligible for scrappage and, since their cars are relatively new, that wouldn’t actually help anyway. However, given the emissions standards maintained by the MOT (as outlined above), as the mileage p.a. of cars tends to decrease as they become older, it should also be fairly obvious that the majority of pollution and ozone-depleting emissions created is not from older cars but from newer ones, despite their improved emissions standards, due simply to the increased higher mileage operated by company cars.

The Environmental Transport Association has much to say on the matter of hidden environmental costs too. 

 

“Swapping a thirsty and polluting older car for a lighter, more fuel-efficient model can make environmental sense if you are doing a high mileage, but if you do relatively few miles it makes sense to keep your car for as long as it is reliable.”

(Ref: ETA 1)

An academic study ("Life-cycle energy consumption and carbon dioxide emissions of world cars") by Dr. Kimmo Klemola, of Lappeenranta University of Technology, Finland, compared 'tank to wheel' emissions with whole-life emissions:

 

"The tank-to-wheel fuel consumption is only part of the story. Petroleum and fuel transport and production consume energy, as well as car manufacturing and scrapping and the maintenance and infrastructure. The total energy consumption of car use is, on average, 54.7% higher than the tank-to-wheel energy consumption alone."

(Ref: Klemola 1)

Using the vast tables of data collected from EU and US sources in that report, Dr. Klemola then went on to produce a paper into the effects of scrappage on lifetime emissions of vehicles. Multiple graphs show clearly that the effects can be decidedly counter-productive.

 

"The results show that rapid replacement of a car fleet is not necessarily the answer for decreasing carbon dioxide emissions and energy use. The fuel consumption for new cars should be considerably lower than for old cars, which is not the case. In USA, the fuel consumption of new cars has steadily increased since 1987. At the same time the average curb weight has increased about 30%."

(ref: Klemola 2)

The views of the European Federation for Transport and Environment concur. Kerstin Meyer of T&E said:

 

"With schools and hospitals all expected to face budget cuts as this financial crisis starts to bite, it makes no sense to start subsidising new cars with increasingly scarce public money."

"It is ironic that the car industry has cried foul every time a piece of environmental regulation has been put forward and demanded impact assessment after impact assessment. But they are strangely quiet on the subject of assessing the environmental benefits vs costs of scrapping incentives, despite billions of public money being at stake."

(Ref: T&E)

Even Philip Sellwood, the Chief Executive of the Government's own Energy Saving Trust is scathing.

"The carbon friendly announcements are contradicted, sadly, by the government’s scrappage scheme. This policy will increase car purchase regardless of CO2 emissions and the government has missed a significant opportunity by spending public money to incentivise any car upgrade when they could have incentivised the lowest carbon emission cars."

(Ref. Sellwood)

So perhaps we should look more closely at the number of vehicles that actually fail the emissions test at first presentation and here’s the clincher:

Percentage of vehicles failing MOT test due to emissions: 3.3% in 2007-08

(Ref. DfT table 1882)

Number of cars registered at end of 2007: 26,878,000 (rounded)

(Ref. DfT table 1886)

 Thus, the number of cars failing the MOT due to emissions: 886,974 p.a. (approx)

The "Economic Argument" Scam

In the event that each and every one of those vehicles became eligible for £1,000 of our tax towards the £2,000 scrappage incentive, that would amount to nearly £900m of taxpayers’ money finding its way back to the car companies – those same car companies that have failed to heed the warnings of over-supply of unnecessarily eco-unfriendly vehicles for many years – so that they can carry on, regardless. 
The fact that 96.7% of vehicles continue to pass their annual emissions tests reinforces the hypothesis above. However, what that doesn’t show is how many of the small proportion of failures often have trivial faults repaired and subsequently pass the test, reducing the failure rate further.

The only conclusion is that the so-called problem of older cars causing significant pollution is a ‘non-problem’ (i.e. no problem exists but the perception is manufactured to exist in the minds of the public to increase the arguments in favour of the industry's call to action).

However, all this rather pales into insignificance when one considers that an owner may choose to scrap a car irrespective of the reason for its failure (or, indeed, whether or not it has failed). Thus, not only would a scrappage scheme not make any significant impact on the ‘non-problem’ of emissions but it could cost substantially more. An astonishing 9.6 million cars fail the MOT for one reason or another on first presentation each year. (Ref. DfT table 1882) Even if we assume that as many as 80% of these are not deemed economically unviable, are fixed and subsequently pass, that would still leave around 2 million vehicles falling into the ‘economically unviable’ category which, with the scrappage scheme, would increase in scope since such a scheme distorts the view of what is considered to be uneconomic. That would mean a whopping £2bn subsidy of our tax money back to the car manufacturers, or a lot of disappointed punters if the scheme is limited to 300,000! (Which industries would then be standing next in line for similar treatment, I wonder?)

In an exchange in the House of Lords regarding the possibility of introducting scrappage, on 18th March 2009, Lord Berkeley asked the Minister at BERR

"Does my noble friend agree that, if he is going to pay me £2,000 or so to sell my old car and buy a new one and if I was the owner of a railway train, passenger or freight—I declare an interest as chairman of Rail Freight Group—could I hand in my old trains, of which there are many, and be given a subsidy to buy new ones in the same context?"

(Ref: Lords)

Where might this end? Manufacturers of fridges, washing machines, televisions, ships?

Then, of course, there is the issue of whether the Government's intended aim to help the British car manufacturing industry would actually be achieved.  Baroness Gardner of Parkes asked the Mister at BERR:

"Has the Minister seen the figures saying that nearly all—over 80 per cent—of new cars are imports to this country? Our car manufacturing industry is mainly exporting cars. Although I am very much in favour of updating cars, is there not a risk that the scheme will not have the benefits to the economy that we hope?"

(Ref: Lords)

The scheme has set aside £300 million of our funds to subsidise the car industry which would allow for 300,000 cars to be scrapped, many of which have several years of useful life left in them but, already, the press is suggesting that as many as 3 million people are expected to want to use the scheme. This ten times overshoot would, thus, cost us not just £300 million but a massive £3 billion in subsidy, although it now appears that the scheme may only be available until the funds have run out. One can only imagine the headlines when 90% of the punters, expecting to get their shiny new car, find that they can no longer benefit from the scheme. As the Financial Times pointed out:

"It was a mere footnote in the German government’s latest €50bn fiscal stimulus. But a scrapping bonus aimed at encouraging new car purchases has become such a success that it has left Berlin facing up to three times the measure’s initial €1.5bn price tag."

(Ref: FT)

The effects on the motor industry have not been thought through comprehensively. Even if 'only' 300,000 car purchases are brought forward, the increase in supply of scrap cars will lead to further reductions in the 'weigh-in' value of scrap metal, at a time when this has already recently collapsed, thus further worsening the profitability of the recycling industry – quite the opposite of that which should be sought. Furthermore, as outlined below, other countries that have implemented this scheme have found that their car industry is crippled even worse when the scheme stops - not only are people then not buying as many cars as they were but those cars that would have been sold have all been concentrated into the subsidised period, resulting in a drought of demand lasting for several years – a situation even more catastrophic than the one in which they already found themselves. There are already anecdotal suggestions that the industry has responded to the 50:50 shared subsidy by simply removing the discounts it was offering anyway so that it appears to be ‘generously’ participating in the scheme and knocking £1000 off the list price, having just raised the list price by that amount in order to do so.

Current sales are down around 30% ... or to put it another way, sales are still at 70% of last year. As the Environmental Transport Association points out:

"And what cars will people buy under this scheme? Apart from the Nissan Micra and the BMW mini we do not make small cars. So 95 per cent of these three hundred million pounds will go to importing cars from abroad. Making our balance of payments worse and the pound against the euro and the dollar will be worth even less.

So who does it help? It will help the new car showrooms but why does the government want to help the car retail trade when it did not help other retailers like Woolworths? It does not make sense.

This scrappage scheme is a way of buying votes for the next election under the pretext of the environment.

This is not prudence, this is prostitution."

(Ref: ETA 2)

“There are lots of 10-year-old cars with plenty of life left in them and from a climate perspective, to send them to the scrap heap is money poured down the drain.”

“Car scrapping schemes are good for boosting new car sales – they have very little to do with the environment and to suggest otherwise is not just greenwash, it is hogwash.”

“Changing a car frequently has a financial as well as environmental cost; drivers who buy a car new and then trade it in after three years incur a cost of as much as 50% in depreciation.”

(Ref: ETA 3)

The message should be fairly obvious: Why save £2,000 on a new car when you can save much more than that on a second-hand one?

The Disastrous Effect on Other Sectors

There is also the question of what effect a scrappage scheme would have on a sector which is probably more significant in the UK than in any other country of Europe; the classic car restoration and maintenance sector.
In the UK, there are 540,000 historic vehicles owned by club members. However, although that is still only a small proportion of all vehicles (and doesn't even account for classics owned by non-club-members), it disguises a significant industry which employs more than 27,000 people!
(Ref: Nieuwenhuis 1)

The introduction of a scrappage scheme would, at a stroke, remove significant quantities of vehicles from the available pool, just at the age when they would otherwise be working their way towards becoming cherished classics. Other vehicles which would normally become donors of valuable and much-needed spare parts would also be eliminated. This is equally true for later life vehicles which aren't destined to become classics but which their owners want to retain in use for as long as possible - the environmentally right thing to do. It is difficult to see how the introduction of such a scheme would not have a massively damaging effect on this sector. Given the figures below, it will take several years to replenish the stock of older vehicles and return to the status quo, if that is even possible. It seems quite likely that the average age of scrapping a vehicle after the cessation of this scheme will have been permanently reduced since the natural supply of spares will have been greatly reduced and, once lost, will be almost impossible to restore. Thus there could be a permanent increase in inefficient use of materials and energy due to shorter lifetimes leading to increased extraction of raw materials and carbon emissions during manufacture.

Even the Automotive Distribution Federation is strongly opposed to the scheme:

“The Automotive Distribution Federation said that the scheme could cost taxpayers more than £500m and would benefit foreign car makers rather than UK manufacturing because more than 80pc of cars sold in this country are imported.”

“The ADF, which represents manufacturers, importers and independent wholesale distributors of car parts, claims that the scheme would be detrimental to the 600,000 staff in the industry who work in service and repair because a wave of consumers would swap their older, high-maintenance vehicles for modern cars.”

"It's a misuse of taxpayers' pounds to purchase and crush perfectly serviceable vehicles and it's a nonsense to think it will meet any long-term economic goals for UK plc," he said. "As a sensible idea it is a non-runner."

(Ref: ADF)

The RAC looked at scrappage schemes in 2007, considering the proposal that payments could be made to owners scrapping older vehicles if they purchase new ones and they also examined the rate of natural scrappage.

"50% of cars are still on the road after 14 years. By the twentieth year more than 95% have been scrapped with the remainder likely to be retained as classic or heritage cars for many years.”

(Ref: RAC)

Given the findings above and the fact that the annual emissions test has required cars to meet their manufacturers’ original specifications for nearly 17 years, it should be fairly obvious that the number of vehicles where this is a problem is, yet again, demonstrated to be almost negligible and diminishing all the time. It points out:

“These schemes work only if a limited number of cars are scrapped and they can distort the market by bringing forward the replacement cycle. In the UK, the ideal age to incentivise car scrappage would be for 17-18 year old cars; incentivising younger cars would only result in payment being made for cars which are going to be scrapped in large numbers anyway.

(Ref: RAC)

However, given that this is the case, one has to ask whether providing the incentive to owners of 17-18 year old cars would be worthwhile since, as shown above, 95% have been scrapped by their 20th year anyway. It hardly seems worth bothering. Of course, we now know that the scheme is to apply to 10-year old vehicles - a category in which most are only little over half way through their useful life.

“They are normally replaced by vehicles slightly younger (typically three to four years) than the one scrapped, the exception being new cars written off in accidents. The slightly younger car is in turn replaced by an even younger car and so on up the age chain of the vehicles so that the new car actually replaces a three year old car which is traded in usually on the basis of age but also on mileage.”

“It would not be necessary to link the incentive to buying a new car as the natural dynamics of the car market would lead to the owners of scrapped cars buying a car three or four years younger than the one scrapped which in turn would lead to a ripple of car purchases up the age chain”

(Ref: RAC)

Note the following section from the same RAC report!

“This effect is accentuated in the UK by the high proportion of new cars on the market (around a half) driven by the company car market where replacement cycles tend to be according to a rigid formula. This is in sharp distinction with many European countries, where owners are much more likely to buy a car new and keep it for a number of years before scrapping it and replacing it with another new car.”

“Most new cars are traded in within 4 years with very few owners keeping cars bought from new for more than 7 years.”

“20% of owners of older cars intend to scrap their car in the next two years. A large majority of them will do it because their car will be too old (47%). 28% expect that the car will fail the MOT test and 84% of the respondents who intend to scrap will replace their car, mainly by a used one. Those scrapping vehicles did so because the vehicle was too old or it had been a write-off after a collision.”

“Over 7 million used cars are sold each year, around 3 times the number of new car sales. This implies that each car has around four owners before it is scrapped at around 16 years, the average length of ownership being around 4 years.”

(Ref: RAC)

Thus it can be seen that the new scheme would not be well-suited to the UK and be extremely wasteful, adopting a cut-off of just 10 years – a ludicrously young lifespan for vehicles which, if designed properly and the parts supply maintained, can be successfully kept on the road almost indefinitely.

The Considered View (i.e. not backed by the SMMT et al.)

Dr Paul Nieuwenhuis, the Cardiff Business School's assistant director for automotive industry research, has been quite active on this subject for a number of years. In 1998, his comments appeared in Motor Trader publication.

“Certainly more new cars would be sold. According to National Franchised Dealer Association director Alan Pulham, in Italy - which is currently engaged in a scrappage programme - sales are up by 38 per cent. After Ireland launched a scrappage programme in 1995, its new car sales increased by 9 per cent. So from both environmental and pragmatic business perspectives you would think the idea would meet with universal approval, but not so, and some of the doubts come from surprising quarters, including Pulham. "When the idea was first mooted we were supportive of it, but as we saw it develop in other markets we changed our stance," he says. Many of the continental scrappage schemes have been run for fixed terms, and Pulham is concerned that if a similar initiative was launched here it would distort the market, and sales would tail off badly when it came to an end. "If these schemes are short term then they're more damaging than beneficial, as we've seen in France (where scrappage ended last year). Sales were down by 20 per cent in 1997 compared to '96. Its been diabolical," he says.”

“Dr Paul Nieuwenhuis, the Cardiff Business School's assistant director for automotive industry research, is unsure that the British love of mid-range cars would fit in with a new for old programme. In markets like France and Italy, where demand for supermini sized vehicles is huge, owners have tended to swap like with like. Nieuwenhuis is not convinced that the driver of an ageing Sierra, unable to afford a Mondeo, would view a Ka as an ideal replacement. As for the environmental advantages of junking older models, even this is the source of some lively debate. There's an argument that a lot of energy is used to build a car in the first place, and so crushing it before the end of its useful life is wasteful. "The industry tends to down play the costs of production and disposal," says Nieuwenhuis, who reckons that up to 30 per cent of a car's lifetime energy consumption is accounted for by production. But scrapping today's ten-year old cars would be even more wasteful; in the 1970s production accounted for up to 45 per cent of energy use.”

“Nieuwenhuis remains unconvinced, and sees a more commercial imperative at work. "Why should people who told you a car was marvellous eight years ago now say it's crap, and that you should scrap it?" Both he and Pulham want far tougher environmental standards applied to cars, and insist that properly maintained older vehicles won't have a problem meeting them. "I don't think the age of the cars is that important," says Pulham.”

(Ref: Nieuwenhuis 2)


A more recent article from The Association of Car Enthusiasts produces yet more material.

“Dr Nieuwenhuis also commented: Unnecessary car use is one element, but we need to separate car ownership from use. Owning a heavy car has a limited impact if you do not drive the thing. The impact is then limited to its production impact – typically around 20% of lifecycle impacts, with around 70% for use and the remainder [10%] for ELV [end of life vehicle] processing, recycling, etc. – these much lauded activities are not without environmental cost.
It is much better to keep the vehicle for a very long time and avoid, or at least postpone, the end-of-life phase. Currently some 12-15 million tonnes of automotive waste is produced each year in the EU alone. Much of this is recyclable metal, but much still goes to landfill. This waste-stream may have to be reduced significantly, unless a sustainable use can be found and a sustainable processing phase introduced to close this loop.”

“In fact, back in November 2003 the Government wholeheartedly endorsed when the then Minister for Trade and Industry Patricia Hewett presented the Charles Ware Morris Minor Centre with a prestigious National Green Apple award for their environmental contribution to the car industry.”

“What all this shows is that, while a scrappage scheme is trumpeted as being an Environmental ‘fix’ it actually has the effect of generating sales for the motor industry far above what they could reasonably expect to achieve were the scheme not available…”

“As Dr Nieuwenhuis says, it is far better to extend the life of existing vehicles and postpone the day when they require scrapping. A well maintained, older car, while not as ‘clean’ as a modern one is not the Environmental scourge it is branded as.

(Ref: ACE)

If you’re still not convinced and want an alternative set of figures, see:
http://www.monbiot.com/arc hives/2009/03/10/scrap-it/

Also well worth reading: http://extra.shu.ac.uk/pro ductlife/Maintaining%20Pro ducts%20presentations/Paul %20N.ppt

Now that you’ve read this article (and well done for sticking with it!), you may want to go to the 10 Downing Street website and sign the petition against the calls for scrappage but this must be done before 18th May 2009.
(http://petitions.number10. gov.uk/No-to-Scrappage/)

References

(ACE: http://www.the-ace.org.uk/ clunker-laws-environmental -fix-or-salesmans-dream-ti cket.html )

(ADF: http://www.telegraph.co.uk/finance/newsbysector/transport/5033498/Car-scrappage-incentive-scheme-flawed.html )

(DfT table 1882: http://www.dft.gov.uk/pgr/ statistics/datatablespubli cations/vehicles/tsgbchapt er9mottestsch1882.xls )

(DfT table 1884: http://www.dft.gov.uk/pgr/ statistics/datatablespubli cations/vehicles/tsgbchapt er9privmotor1884.xls )

(DfT table 1886: http://www.dft.gov.uk/pgr/ statistics/datatablespubli cations/vehicles/tsgbchapt er9vehiclescurr1886.xls)

(ETA 1: http://www.eta.co.uk/Green+driving+means+keeping+a+car+longer/node/11907 )

(ETA 2: http://www.eta.co.uk/node/12018 )

(ETA 3: http://www.eta.co.uk/%C2%A32%2C000-car-scrappage-scheme-launches-next-month/node/12017 )

(FT: http://www.ft.com/cms/s/646018d0-23a4-11de-996a-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F646018d0-23a4-11de-996a-00144feabdc0.html%3Fnclick_check%3D1&_i_referer=&nclick_check=1)

(Haynes: http://www.haynes.co.uk/we bapp/wcs/stores/servlet/Fe ature_MOTView?langid=-1&st oreId=10001&catalogId=1000 1 - checks21to25 )

(Klemola 1: http://www2.lut.fi/~kklemola/dontfly/carsof2006.htm )

(Klemola 2: http://www2.lut.fi/~kklemola/dontfly/life_cycle_emissions_of_a_car.htm )

(Lords: http://www.theyworkforyou.com/lords/?id=2009-03-18a.229.6 )

(Nieuwenhuis 1: http://extra.shu.ac.uk/pro ductlife/Maintaining Pro ducts presentations/Paul  N.ppt )

(Nieuwenhuis 2: http://www.talkingmotors.c om/industry-news/general-n ews/10989-bangers-n-smash.html )

(RAC:  http://www.racfoundation.o rg/files/Car%20ownership%2 0in%20Great%20Britain.pdf, section 3.0)

(Sellwood: http://carbonchallenge.typepad.com/carbon_challenge/ )

(T&E: http://www.transportenvironment.org/News/2009/3/EU-should-not-encourage-subsidies-for-new-cars/ )

  v1 DLE 26th April 2009

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