German 'cash-for-clunkers' bonus ends, leaving outlook uncertain

3rd September 2009, Comments 0 comments

The controversial measure clearly boosted car sales during the depths of the global economic crisis and led to similar programmes being enacted worldwide.

Frankfurt -- Germany's landmark car scrapping bonus scheme ended Wednesday after underpinning two million auto sales and a key industrial sector that could now suffer severe withdrawal symptoms.

Several analysts said the number of scrapping subsidies was excessive even for Europe's biggest car market and would leave dealers of small foreign autos in particular stranded if buyers shun showrooms in 2010.

The controversial measure clearly boosted car sales during the depths of the global economic crisis and led to similar programmes being enacted worldwide.

German auto sales jumped 28 percent in August compared with a year earlier, extending a string of strong monthly results, VDA auto federation data showed.

The "cash-for-clunkers" rebate of 2,500 euros (3,550 dollars) for drivers who junked old cars and bought a new one brought total sales since January to almost 2.7 million autos, 565,000 more than in the first eight months of 2008.

Programmes in Japan and the United States pushed car sales higher in August for the first time in more than a year, while dealers in countries like China, France, Italy and Spain have also been helped by state subsidies.

German auto exports fell by 10 percent in August but that was less than in previous months, VDA president Matthias Wissmann stressed on Wednesday.

He said it was "the most important figure" because it showed the worst of the global auto slump had passed.

VDA expressed hope that any fall in German sales would be offset by gains elsewhere as many wondered what lay ahead for a sector crucial to many economies.

In Germany, "we will see a steep decline in the market," Metzler Bank analyst Juergen Pieper told AFP.

Starting in early 2010, "you will see two or three very weak quarters," he forecast.

Ferdinand Dudenhoeffer from the Centre for Automotive Research forecast German sales would fall by one million to around 2.7 million cars next year.

"It will be the largest downturn ever suffered by the German car industry," he warned.

Both analysts said the government had overshot on the scheme, with Dudenhoeffer commenting: "It makes absolutely no sense to offer two million scrapping premiums if you have a market of around three million cars per year."

The programme tripled from its initial size owing to strong demand and will cost Berlin roughly five billion euros in all.

Others unhappy with the scheme were retailers who said major purchases had been postponed as consumers shopped for a new car.

Worse still, a study by the Roland Berger consultancy last month estimated that more than 90,000 jobs could be lost as the German scheme wound down, with dealerships in the front lines since manufacturers could still ship elsewhere.

German luxury carmakers did not profit greatly from the bonus scheme, however, and may suffer fewer aftershocks as a result.

BMW production chief Frank-Peter Arndt told the daily Passauer Neue Presse: "We were not particularly pleased by the scrapping premium" because it did not bolster sales of expensive cars.

"We will be less affected by its end," Arndt added.

The bonus was the most popular component of government economic stimulus measures that included a 17.5-billion-euro credit support plan unveiled Tuesday.

Germany, which has earmarked 115 billion euros to support businesses, may be pulling out of its worst recession for six decades after posting sequential growth of 0.3 percent in the second quarter.

William Ickes/AFP/Expatica

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