New vehicle industry proposes scrappage incentives

Media Release
26 May 2009

New vehicle industry proposes scrappage incentives

Earlier this month the Government launched a second trial vehicle scrappage scheme to encourage the removal of old, less safe and environmentally unfriendly vehicles from the New Zealand fleet.

The new vehicle industry proposes that this scheme be extended.

“We have a serious problem in New Zealand with the ageing of our vehicle fleet, and an incentive for owners to scrap vehicles which have reached the end of their economic lives would make it easier for consumers to upgrade to a safer, cleaner (tailpipe emissions) and more fuel efficient vehicle,” said Perry Kerr, CEO of the Motor Industry Association.

When compared to other OECD countries, New Zealand has one of the oldest car fleets. The average car in New Zealand is over 12.5 years old and getting older (compared to Australia at 9.7 years and just 6 years in Britain)

One of the main barriers facing consumers wanting to upgrade their vehicle is affordability. A nationally-implemented scrappage incentive would go some way towards overcoming that hurdle. “We see some very worthwhile benefits arising from a properly-structured programme which would pay for instance $1,500 to the owner of an old and tired vehicle who presents it for crushing,” said Mr. Kerr. “Such a scheme would need to recognise the following:

- Vehicles would need to have an unexpired WOF and registration to prevent derelict cars from taking advantage of the scheme.
- The worst vehicles should be targeted first (polluting old diesels) followed by petrol cars without a catalytic converter. These vehicles were identified as being the worst polluters in the 2008 Auckland scrappage trial.
- The payment could (but not necessarily) be tied to the purchase of a later model vehicle.
- Increase in motor vehicle sales would cover the costs of the scheme due to the extra GST and company tax revenue that would result. i.e. if the scheme resulted in 3,000 additional sales, GST alone would be in the region of $6.7million (based on an average sale price of $20,000.) The cost to scrap 3,000 vehicles would be $4.5 million
- Health and safety benefits estimated at between $340 and $ 870 per vehicle would also accrue with the removal of the worst vehicles from the roads.”

“Other countries which are implementing or considering such schemes have a motor vehicle manufacturing industry to support,” said Mr. Kerr, “but this should not stop New Zealand from taking part. “We might not have a vehicle manufacturing industry but we have a vehicle distribution industry which is hurting, and we also have an aging vehicle fleet which is one of the oldest in the developed world.”

“We need to address these issues for economic, environmental and health and safety reasons, so we are encouraging the Government to roll out such a scheme nationally’”, Mr Kerr concluded.

ENDS

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