High order backlog — German car scrappage program has asymmetric impact

Discussion in 'Economics' started by ASusilovic, Jul 8, 2009.

  1. Frankfurt am Main, July 2, 2009.

    In the first half of 2009, registrations of new passenger cars in Germany rose by 26 percent, to 2.06 million units. The figure for June even amounted to 427,000 passenger cars, an increase of more than 40 percent compared to the same month last year. The result was the best for the month of June since the German reunification in 1990. However, this development is largely the result of the revised motor vehicle tax and the scrappage program (known as "environmental premium" in Germany). "Because the global financial and economic crisis has led to a plunge in exports especially, these incentives boost domestic demand particularly for small and compact cars and have thereby stabilized workforce levels this year," said Matthias Wissmann, President of the German Association of the Automotive Industry (VDA), at the VDA half-year press conference in Frankfurt.

  2. Once this program ends, vehicle sales will plummet like a leaden balloon.

    That's the problem with programs like this; they're like heroin. You have to keep feeding the heroin to the addicts otherwise they'll curl up with the DTs and shits and go through withdrawal at home when the heroin supply dries up.

    This is stealing future sales and booking them earlier than they would have normally occurred, at the expense of the future.
  3. Good to know. Meanwhile I am buying BMW, Daimler and Porsche. Do you want to take the opposite part of the trade ? :)
  4. Illum


    Sales may drop after program, however, they worked off some inventory and with production slowed, they should be in a much better position. The earnings going forward.. not great. But at least they won't implode.
  5. The whole program has only one goal : it is a temporary incentive program. Earnings going forward, not great but still there will be an impact. And not to forget, it stablizes also the supplying industry.