Spreading some good news: Germany's 'Scrap' Bonus Fuels Car Sales

Discussion in 'Economics' started by ASusilovic, Feb 28, 2009.

  1. BERLIN -- Around the world, some economists and governments have their doubts about whether costly fiscal-stimulus measures will work. But in Germany, one measure already is a roaring success.

    Germany's €2,500 ($3,200) subsidy for people who scrap an old car and buy a new one has triggered a stampede to dealerships and a run on small cars. It's also inspiring retailers of other products, from electronics to false teeth, to copy the idea.

    Falling car production has become a significant drag on the economy in Germany, Japan, the U.S. and other major car-producing nations. The sector's sales crisis knocked about 0.6% off Germany's gross domestic product in the 2008 fourth quarter, according to a report by Credit Suisse, contributing to the 2.1% overall contraction in Europe's biggest economy last quarter.

    Germany's auto industry made 17% fewer cars in the fourth quarter than in the year-earlier period, as the global economic slowdown hit exports at BMW AG, Daimler AG and other car makers. The industry's importance to Germany -- where the government estimates that around one in seven jobs depends directly or indirectly on autos -- led Chancellor Angela Merkel's government to introduce the old-for-new car subsidy. It took effect Jan. 27.

    Since then the program has sparked a car-buying craze in a nation notoriously reluctant to consume. Sabine Mumm, a librarian from Schleswig-Holstein in Germany's north, decided last month to buy her first new car in more than a decade. It took several weeks before she found a dealer with any in stock.


    A survey by research institute Forsa found that of 16 million Germans who own a sufficiently old car, 1.2 million people firmly plan to use the scrap bonus and many more are thinking about it. Many may be disappointed: The government plans to reward only the first 600,000 new-car purchases.


    Time deposits in Germany as of Dec 2008 : 1275 billion EUR. Saving deposits : 535 billion EUR. Up 18,7 % and 12,8 % respectively.

    Source : Deutsche Bundesbank


    Time to spend some money ! :)
  2. Therefore, to support demand for auto sales during this period, I'm directing my team to take several steps. First, we will ensure that Recovery Act funds to purchase government cars go out as quickly as possible and work through the budget process to accelerate other federal fleet purchases as well. Second, we will accelerate our efforts through the Treasury Department's Consumer and Business Lending Initiative. And we are working intensively with the auto finance companies to increase the flow of credit to both consumers and dealers. Third, the IRS is today launching a campaign to alert consumers of a new tax benefit for auto purchases made between Feb. 16 and the end of this year -- if you buy a car anytime this year, you may be able to deduct the cost of any sales and excise taxes. This provision could save families hundreds of dollars and lead to as many as 100,000 new car sales.
    Finally, several members of Congress have proposed an even more ambitious incentive program to increase car sales while modernizing our auto fleet. Such fleet modernization programs, which provide a generous credit to consumers who turn in old, less fuel efficient cars and purchase cleaner cars have been successful in boosting auto sales in a number of European countries. I want to work with Congress to identify parts of the Recovery Act that could be trimmed to fund such a program, and make it retroactive starting today.

  3. on top of that, if ou buy a new car, you can have sex in the trunk with my neighbour' sister, she's number 4 prostitute in Baden Wurhtenberg
  4. The effectiveness is amazing. 62% of the new purchases of this "bailout" go towards foreign car producers, securing foreign jobs. Germans shooting themselves in the foot once again :cool:

  5. Makloda,

    I think Toyota should be a "strong buy" right now...:D
  6. I bet that feels like a baseball bat in a trash can!!
  7. It is never that simple. In the United States, Honda, Nissan, Toyota, and other "foreign" manufacturers build cars in the US

    However, GM, Ford & Chrysler build many of their cars in Canada & Mexico.

    My Honda is American built. I cannot be sure of whether my previous "American" cars were.

    In addition, what is a "foreign" automaker? Ownership of all these companies is international. Many Americans own Toyota and Honda Stock. Many Japanese own GM & Ford stock.
  8. Ninja


    Foreign car or not, buyers have to pay 19% VAT on each new car and also they are paying for the income, bonuses, taxes, social insurance, etc. for the German dealers and their employees...
  9. "Foreign" from the point of view of German taxpayers. None of these non-German producers have any production facilities in Germany, mostly because labor cost is too high compared with Asia and Eastern Europe.
  10. FGBL07


    Even the "German-Built" cars consist of up to 60% foreign built and imported parts.

    The Abwrackprämie is a great succes for the sellers of small, i.e. "cheap" cars.

    The likes of BMW, Audi and Mercedes don't profit from it because their cars are priced pretty high.

    It is a success story for Opel trying to escape bankruptcy.

    Though critics of the Abwrackprämie say it will have short-term effects only.

    We will see.
    #10     Mar 31, 2009