David Smith, the head of India's Tatas-owned Jaguar Land Rover, has said that the terms proposed by the UK Chancellor Alistair Darling's scrappage scheme for the motor industry will have a minimal impact on car sales, media report says.
"The boss of Jaguar Land Rover (JLR) has questioned the Chancellor Alistair Darling's scrappage scheme for the motor industry, claiming it will have a minimal impact and merely distort a fundamentally struggling market," David Smith said in an interview to the Daily Telegraph.
Smith's comments has come at a crucial time for JLR as it is seeking a 500 million pounds package of loans and refinancing from Government-backed banks Royal Bank of Scotland and Lloyds Banking Group, the report added.
Under the scrappage scheme, consumers would be offered a 2,000 pound discount on new cars if they scrap a vehicle older than 10 years in a bid to stimulate car sales in the UK, which are down 30 per cent so far this year.
The industry had strongly lobbied for a scrappage scheme, warning that hundreds of thousands of jobs were at risk.
However, Smith said that the UK's scheme is likely to disappoint because of the Government's decision to limit the state discount to 1,000 pound, with the industry contributing the other 1,000 pound, and to set a high age for eligible old cars, significantly above the average vehicle age of seven.
He said: "I think all of us feel that those things are both going to dilute what could have been up to 300,000 more car sales this year down to a lower number. I guess we now need to see what the customer reaction is, but it certainly isn't going to be what it would have been if they had fully put through that scheme," – implying that it is half-hearted.
JLR, which employs 15,000 staff across sites in the Midlands and Merseyside, welcomed the attempt to help the industry, and is likely to sign up for the scheme because of the extra volumes it should bring to dealers and supplier, the telegraph added.
Smith has also warned that trends in European car sales, despite scrappage schemes, remained downwards. "Strip away the distortion of the scrappage schemes, the underlying trend is downwards in Europe.
Most of the increase in sales is in the small segment and at some stage there will be a negative effect on those segments when the scrappage incentives come off," Smith added.
