Sector: Automotive

Economically up-against-it carmakers, including Ford and Toyota, are calling on European governments to continue with their car ‘scrappage’ schemes.

Germany and the UK are among those major economic powers to have introduced so-called ‘cash for clunkers’ programmes, which have provided ailing car sales with a much-needed shot in the arm. However, now, with recessionary forces receding, the worry is that automotive car sales will dip sharply without such incentives as existing schemes come to an end.

Thus far, the US, UK and German governments have splashed out more than e8 billion (around £7 billion) on car scrappage, but funding for these schemes is starting to run out and carmakers are now calling for extensions.

Germany’s sizeable e5 billion scheme, which recently ended, was credited with a key role in its economy’s emergence from the recession in the second quarter. Over here, the UK scheme is expected to end either in February or when the £300 million set aside by the government runs out.

While the automotive sector’s major manufacturers liaise with legislators, investors have witnessed a rally in the hitherto bombed-out share prices of UK-quoted car sellers. Pendragon has perked up to 38.75p, versus a 52-week low of 1.4p, Lookers has accelerated to 64.5p of late, up from a year’s trough of 15.23p. On AIM, Vertu Motors, now the ninth-largest UK motor retailer, recently reported a continuance of recent positive trading trends and its shares have motored to 42p, up from their recent 10p low and valuing the group at £82.5 million.