Scrappage – is this the way to go?

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Many years ago, to buy a new vehicle in Singapore, you had to hand in another vehicle for scrap. This was done to keep the motor car population at sensible levels in the small island state. Of course, the question was ‘what do you do if you haven’t got a car to scrap’? The simple answer was that the dealer would supply it, to comply with the regulations, and you drove away in your new (first) car.

A similar incentive scheme has being offered in Europe for vehicles more than nine years old, but not to keep the number of cars down, but to stimulate new car sales, with an additional spin-off that the new cars have to be ‘greener’ than their ten year old forebears.

Sales in Germany rebounded in response to the $100 billion government program offering a scrappage bonus of about $5000 for cars over nine years old and this has also been followed by some other countries which are offering similar subsidies to boost sales of new cars. However, like many government ideas, I am told the scrappage system just died a quiet death!

Thailand’s answer to boost new car sales was the rebate scheme for first cars and in the eco-car category. This looked as if it were a winner, but like so many things here, nobody quite thought it through. A mad scramble at the dealers and cars driven away, to be repossessed later as the new owner could not afford the monthly payments. What this did was artificially boost new car production, which then went flat in the following years. It also killed the secondhand market, to the stage that secondhand vehicles can be bought for next to nothing, and the used car yards are still hurting.

No, government intervention has rarely assisted the common man.