Britain is studying the idea of car scrapping schemes introduced in other European countries to boost demand for new models, business secretary Peter Mandelson said today.
German dealers have reported an upturn in business after the government announced plans to issue certificates worth €2,500 for all new car buyers who scrap vehicles that are at least nine years old.
Britain last week pledged to guarantee up to £2.3 billion (€2.6 billion) of car loans to help the car industry to battle a slump in demand that has cost thousands of jobs.
"There may be other ways to help lift demand including this scheme that's been operated in some other European countries where you trade in old cars and get a help in buying a new one," Mr Mandelson told reporters during a visit to Belfast.
"I am looking at the experience of other countries before reaching any conclusions let alone starting to discuss it with my colleagues in the government," he added.
A spokesman for British prime minister Gordon Brown earlier played down the prospects of such a scheme being introduced.
"We have said scrapping schemes are an interesting idea," Mr Brown's spokesman said. "But we are not convinced how a scrappage scheme would provide a stimulus for demand."
New car sales in Britain fell by almost a third year on year in January to register their worst performance for that month since 1974, according to figures from industry body the Society of Motor Manufacturers and Traders (SMMT). The SMMT urged the government to adopt a car scrapping scheme.
It is also discussing measures with the banks to boost the flow of credit to the finance arms of the car sector.