Car Scrappage Scheme: German Car Sales Booming

Motoring Channel Staff - 6/May/2009

Berlin, Germany – The Australian car market slumped to new lows for the month of April 2009, with almost every car maker and importer recording negative growth.

Industry analysts say that this is a bottoming out of the car market, which dropped by 23.9% in April, and that sales may improve slightly in the next few months.

Australia is not alone. Many markets across the world are grappling with the consequences of the global financial downturn.

A large majority of countries are experiencing similarly shocking drops in new car sales, including the U.S. whose cars sales were down by a stunning 37.4% in April 2009.

However there is one scheme that seems to have done the unthinkable - Germany's "scrappage" incentive.

From February 2009, the German government legislated a new bill that pays €2,500 ($4,500) to any owner of a car that is nine years old who trades it in to buy a brand new car.

The old car is then crushed and scrapped. 

In Germany, the scheme is called Abwrackpraemie (scrap-car-incentive).

So wildly successful has the scheme been that car sales in Germany for the first few months of 2009 are approaching the best ever recorded sales figures, which were in 1999 according to official numbers (supplied by VDIK - the German Association of International Motor Vehicles).

While almost every Western nation recorded record drops in new car sales, Germany recorded a mind boggling 40% rise in March and April saw a significant 19.4% rise in new car sales, due almost entirely to the new scrappage scheme. February sales also rose by 21%.

Many car makers and car dealerships in Germany are doubling the scheme, adding their own €2,500 totalling a saving of €5,000 for a new car.

In February, Volkswagen confirmed that it had its best February on record, selling more cars that month than any previous February in history.

The British government recently adopted a similar 'scrappage' scheme after seeing its success in Germany and more countries in Europe are considering similar moves to improve commerce.

France, Italy and Spain also have similar schemes in the works.

The stunning success of the scheme, which has been extended in Germany until year's end, is putting pressure on the Australian government to implement a similar tactic.

Another benefit of the scrappage scheme is that old cars are being crushed and taken off the roads altogether, to be replaced by new car with improved fuel efficiency and safety. 

This also results in a large reduction in CO2 emissions as low tech, run-down cars are replaced. VDIK president Volker Lange says that compared to the first quarter of 2008, the C02 emissions from new cars bought in the same period in 2009 has been reduced by an estimated 6.5%.

Pressure on the Australian government to introduce its own scrappage scheme will no doubt increase as the success and the clear evidence to back up such schemes continue to spread across Europe.