WELSH car industry experts warned yesterday that the sector may struggle to maintain its recovery after the government scrappage scheme ended, despite encouraging March figures.

Sales of new cars increased by 26.6% in March according to figures from the Society of Motor Manufacturers and Traders, as the end of the scrappage scheme fuelled a surge of late buyers.

The government-sponsored “cash for bangers” scheme ended on March 31, with a total of 397,383 cars being sold under it across the UK.

Welsh figures showed that there was a 22.65% increase last month compared to March 2009 and a 22.2% improvement on the first quarter of last year.

Scrappage deals accounted for around 12.2% of sales in March, with fleet and business deals also improving during the month.

New registrations between January and March last year were almost 30% down on 2008, while the same quarter in 2010 saw an improvement of 27.3%.

Industry leaders cautiously welcomed the figures, but warned that the market may face leaner times.

Dr Peter Wells of Cardiff Business School said the boost may be down to a last-minute rush to take advantage of scrappage deals.

“There is an element of people buying earlier to take advantage of the deals before the scheme ended, but it might also be a reflection of the aggressive marketing campaigns that manufacturers have taken with their own ‘swappage’ deals to stimulate the market.

“The idea was always that the scrappage scheme was a holding strategy, an attempt to keep the industry going until market conditions resume, but the Welsh market has not yet shown full signs of recovery and as a consequence things are going to be very difficult as these incentives are running out of steam.

“The sort of offers being made on swappage schemes are more aggressive, with the age of qualifying cars reduced. You have some seven-year-old cars available for the scrappage scheme and these should not be destined for the scrap heap.”

Dr Wells warned that the Welsh car-buying market may struggle disproportionately to continue the recovery, which has seen new car purchases increase consecutively for the last nine months.

“Traditionally, the Welsh market has tended to follow the UK market and in some respects the scrappage programme has been beneficial as it helped buyers of smaller cars which were being bought under the scheme, but when the scheme ends there will be problems here.

“Compared to other parts of the UK at least, there are not as many wealthy individuals, major businesses and higher level functions – the economy is tilted to the service sector, where employees might not be able to make big ticket pur- chases such as cars, creating additional pressure on the market.”

Professor Garel Rhys, president of the Centre for Automotive Industry Research, said: “One of the reasons for this rise is that in March last year, the scrappage scheme hadn’t really kicked in.

“But having said that, 26% is a pretty healthy figure. Even so, March 2009 was a terrible month although it’s heartening to see the market going this way.

“From now on, the months will be compared with last year’s when the scrappage scheme was really in place.

“The industry itself is expecting that from now on the figures will be below last year; if they are not, then we really have got a sustained recovery on our hands.”

Prof Rhys said sustained economic growth is unlikely until next year.

“Even in 2011 sales will not have recovered to 2007 levels; all along my expectations have been that it’s probably 2013 that we will see that figure being beaten.”

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