By on March 4, 2009

No, you are not hallucinating. Germany’s February car sales are out. Bottles of champagne will soon follow. Unbelievably, German cars sales rose in February by 21 percent. This is what the Verband der Automobilindustrie (VDA) told Automobilwoche [sub]. 278.000 units were moved. “These are the highest February sales numbers in the last ten years, ” VDA-President Matthias Wissmann said at the Geneva auto show. “For the first time in six months, registrations are growing. We expect that domestic sales of the complete first quarter will be above prior year numbers,” Wissmann said. It’s getting even better, much better:

A lot of German cars are made to order. In the last week of January, orders jumped 16 percent. In February, orders skyrocketed a mind-numbing 63 percent.

What caused the run on the showrooms? According to the VDA, it was triggered by the reform of the vehicle tax, and especially by the extremely successful clunker-culling program. Germany’s government hands €2.5K to everybody who drives his old car to the wrecking yard and gets a new ride. Supposedly, this was only helping low-budget imports. Not so, says the VDA. Compact and mid-sized cars are selling just as briskly as small ones. Also, says Wissman, “50 percent of the customers who drive their old one to the wrecking yard end up buying German.” Volkswagen sold 23 percent more, their Czech subsidiary Skoda added nearly 75 percent. Even their Spanish ugly duckling Seat added 19 percent. According to Volkswagen’s hometown paper Wolfsburger Allgemeine, VW received orders for 125K Golfs in February, common are 40K-50K for the month. Instead of sending workers home, VW is now planning special weekend shifts to keep up with the demand. Certain Golf models have delivery times until June.

The only ones left behind by Germany’s Economic Miracle II are the luxury cars. Audi is doing OK with an increase of 0.4 percent. BMW lost 25 percent and Mercedes shed 26.9 percent in February. Their Smart marque rose by 16 percent.

All in all, giving money to people who buy cars seems to work better than handing it to people who, well, uh, buy Gulfstreams.

Detailled numbers (in German) can be found here.

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41 Comments on “Return Of The Wirtschaftswunder: German Car Sales Up 21 Percent...”


  • avatar
    Robert.Walter

    Yes, but if we talk sustainability, we will see in a few months if the hangover was worth the high.

  • avatar
    bill h.

    Just 2.5 Euros for the clunker turn-in reward?

  • avatar

    @Bill: Yeah, even the Germans wouldn’t fall for that. Korrekted.

  • avatar
    bluecon

    I thought Marshall was the Father of the Economic Miracle.

    This is just pushing the demand forward. Will pay for it in the future. Likely some are buying before Weimer Republic like inflation kicks in.

  • avatar
    BDB

    Inflation? The world is in danger of a deflationary spiral if anything.

  • avatar
    gzuckier

    betcha all those sales are diesels.

  • avatar
    grog

    Just 2.5 Euros for the clunker turn-in reward?

    Yeah but with the exchange rate, that’s worth around $500 US.

    We don’t call our currency the 21st Century lira for nothing.

    This suggests that Germans, at least, have enough income and job security to get a new car. And flowing credit and all the other nonsense.

    I don’t see how effective this would be here. I mean I’m surrounded by people who drive various crapmobiles like Sunbirds or just about any Olds built between 1987-95. Even if these people were given let’s say $3000 to purchase a car by turning in their old clunker, I doubt many of them would have the dough to do much more than purchase a slightly newer (but still very used), lower mileage, crapmobile.

    When you don’t have a job, or a job that pays squat, it’s hard to make payments even with the most liberal of loan terms. And we’ve seen how well that philosophy has paid off.

  • avatar
    Vega

    @bluecon:

    Not necessarily. From what I’ve seen at junkyards (with tears in my eyes) a lot of the scrapped cars were actually low mileage, excellent condition 10-15 year old “pensioner cars” (think VW Jetta, Passat sedan, Opel Vectra, small engine E34 5 series etc.), which would probably have served their aging owners until the end of their driving careers.

    The “free state money” just gave these guys an impulse to buy a new car for one last time, even if it made no fiscal sense for them. And german pensioners usually are able to and do pay in cash. Just like saving taxes, for some people the urge to get free money from the government can be stronger than the sex drive. Especially if were talking about this senior demographic.

  • avatar
    bluecon

    Inflation? The world is in danger of a deflationary spiral if anything.
    I am betting on inflation. Then stagflation and then depresflation.

  • avatar
    BDB

    You need something like the oil shock, or a rise in food prices, to have stagflation.

    For a while it seemed that might happen, but now energy and food prices are in the toilet with everything else. House prices going through the floor are just the beginning if nothing is done.

  • avatar
    Robert Frankfurter

    grog :
    March 4th, 2009 at 2:53 pm

    Just 2.5 Euros for the clunker turn-in reward?

    Yeah but with the exchange rate, that’s worth around $500 US.

    in Germany 2.500 € are by todays rate 3129,25 US$
    in Austria its 1.500 € coming to 1877,55 US$

    provided your firm in the very basic math

    In both cases – a decent sum

  • avatar
    tesla deathwatcher

    Anyone know how many car sales in Germany are built to order? I’ve heard almost 50%. How long does the building process take? I’ve heard 3 months from order to delivery.

    [Robert, it used to say 2.5 euros instead of 2.5k euros. Typo has been corrected.]

  • avatar
    Paul Niedermeyer

    Not all that surprising. This is “catch-up”, not “pull-forward”. German sales have been low for a number of years. They sat out the boom, saved their money, and now have an incentive to buy.

  • avatar

    They saved their money? How stupid is that. You can’t drive a pile of money.

  • avatar
    Robert Frankfurter

    tesla deathwatcher :
    March 4th, 2009 at 3:20 pm

    Anyone know how many car sales in Germany are built to order? I’ve heard almost 50%. How long does the building process take? I’ve heard 3 months from order to delivery.

    More then 50% of cars on Europe are build to order – and that takes not longer then, in case of a leading brand like Mercedes, BMW or Toyota if at worst a few weeks only. Could be delivered to your dealer or even home in a matter of days – and you can choose not only from a wide variety of outer color and interior fitting but a lot of other technical gimmicks.
    The production process over here is highly efficient.

  • avatar
    tom

    Germany traditionally has a rather high savings rate. The average German saved about 11% of his incomes over the past years, Americans on the other hand have had a savings rate that is below zero, which in effect means that they on average (!!!) spent more money than they earned.

    So the German car market has never been as inflated as the American one which is of course good in a situation as severe as the current crisis.

  • avatar

    Update on delivery time added. Usually it’s 4 weeks.

  • avatar
    Kevin

    grog: Yeah but with the exchange rate, that’s worth around $500 US.

    We don’t call our currency the 21st Century lira for nothing.

    Wow, obviously you’ve been in a coma since last July. Whew, wait til you get caught up on the business news … I suggest you sit down first …

  • avatar
    Kevin

    The average German saved about 11% of his incomes over the past years, Americans on the other hand have had a savings rate that is below zero, which in effect means that they on average (!!!) spent more money than they earned.

    The American savings rate is back up to 5% … So are we all happy now? Good thing right?

    Of course Germans save more, they have a suicidally aging demographic. The old lend to the young, and the Germans have been lending to the Americans. Hope that’s working out for them…

  • avatar
    Dave

    I think Paul N is right – it’s catch-up rather than pull-ahead, and France and Spain have similar incentives so maybe we’ll see their sales increase too.

    BTW, am I reading the cresults right? Opel up 4% for the month byt are the right-hand columns showing the ytd with Opel down 7.9%?

  • avatar
    tom

    The American savings rate is back up to 5% … So are we all happy now? Good thing right?

    I actually have no idea what kind of savings rate is the best. Especially not in this economic environment. I’ve read, that theoretically, a savings rate of 10% during good times is considered to be healthy. Right now, a negative savings rate would probably be in order, although you’d need some saved cash from the good times. Also, it’s psychologically counter intuitive for the average consumer to spend more during bad times, so this will probably remain theory. The cash for clunker program is kinda working towards that direction though…

    One thing I do know though: A negative savings rate cannot possibly be sustainable.

  • avatar
    tom

    BTW, am I reading the cresults right? Opel up 4% for the month byt are the right-hand columns showing the ytd with Opel down 7.9%?

    correct

  • avatar
    Robert Frankfurter

    Thats all retro – in highly developed Switzerland even ministers are traveling by bicycle and public means – daily. Alternative e.g. electric transport (individual & public) picking up fast.

    Switzerland is one of the highest developed countries in the world, with rough uneasy terrains but a clever population – more and more give up individual oil based transport altogether.
    And live better by that.

    Traditional oil based transport means (think producers) as sold today are dead men walking, the one high on taxpayers wallet bailout drug, tumbling dinos

  • avatar
    cleek

    gzuckier :
    March 4th, 2009 at 2:51 pm

    betcha all those sales are diesels.

    Couldn’t be. Diesels destroy the planet.

    Everybody who bought a hybrid, say Ja…

  • avatar

    ITS REALLY SIMPLE.

    The problem ALL THE AUTOMAKERS ARE HAVING is that the banks aren’t granting credit to people who aren’t worthy of it.

    CREDIT WORTHY PEOPLE and the RICH have no problem buying BENZES or BMW’s or VW’s so they can easily choose those vehicles wherein the rest of the world can’t. Luxury car sales are going well too.

  • avatar
    Robert Frankfurter

    @Flashpoint :
    March 4th, 2009 at 4:41 pm

    CREDIT WORTHY PEOPLE and the RICH have no problem buying BENZES or BMW’s or VW’s so they can easily choose those vehicles wherein the rest of the world can’t.

    Wrong - rich people push to poor people cars and houses they can never afford and dont need.

    (given some big sharks have some temporary problem lately to get the rotten metal on credit to the otherwise credit-unworthy out of the door – but Obama will walk with FED printing $ over water and make it happen again – on the wallet of the many poor suckers tax money)

    Therefore the really rich are flying private jets and your struggling paying the rent on your ailing SUV or leaking GM clunker.
    And yes – out of pure clean fun and as hobby (having a good laugh after having screwed the rest of the poor pack and the pocket full of their cash) some in the higher food-chain get a Porsche – just for showing off when the red lights are on the TV camera…

  • avatar

    @Flashpoint: The numbers speak against it

  • avatar
    wsn

    The saving rate is entirely depending on the FED.

    Without the FED, if the economy is slow, the savers will get a low interest rate from the borrowers. Say, 1%~5%, that’s not too much incentive. So the savers might as well buy something or start a business. Thus making the economy go faster.

    If the economy is too hot, everyone is burrow money to flip houses and gain 30% per year, then naturally the few remaining savers can demand a higher interest rate, say, 20%. Thus discouraging more gambling and keeping the bubble in check.

    Now we have FED. They provide a < 5% interest rate no matter what. So the borrowers don’t need the savers; they only need the FED. In the face of inflating property prices, the burrower are rewarded again and again; the saver are punished again and again. And we are here now.

  • avatar
    Dave

    Thanks Tom
    So Opel’s down ytd, and all the non-luxury brands are up ytd…… by hey, Chevy (the Korean version) is up so everything’s ok (or maybe it explains why GM Europe is looking for a partner with deep pockets).

  • avatar

    @wsn: Thanks for clearing that up

  • avatar
    Steven Lang

    I don’t know about all that.

    I have some friends who have bought houses over the last few years that were well into the seven figures. Most of them are either struggling to make those payments or are bankrupt.

    Then I have other friends who bought earlier in their careers, and thereby simply decided to keep a far more modest house. Even with the current market corrections, they’re in a fairly comfortable and stressless position.

    Over the years, I’ve slowly realized that being wantless about ‘stuff’ leads to a better frame of mind.

  • avatar

    Isn’t the point of the story that there seems to be a plan that actually works? It’s selling cars. It creates special shifts (=overtime) to make them. It’s cheap, €1.5b all told, if and when the money ever gets used.

  • avatar
    tesla deathwatcher

    But does it really work? Will the good things last? Or is the government just reinflating a bubble that will again burst?

    I’m not saying that the cash-for-clunkers scheme is not working. But I am skeptical.

  • avatar

    If people have to wait for a Golf – THE bread and butter car in Europe – until June, then something is working.

    So we are dumping billions down bottomless pits called GM and Chrysler and monthly sales numbers deteriorate. In the meantime, we are seeing double digit growth in Germany, and all we can come up with is “will it last?”

  • avatar
    Ronman

    “All in all, giving money to people who buy cars seems to work better than handing it to people who, well, uh, buy Gulfstreams.”

    Great thing to say… just genius…

    I for one dont like to finance a car, i think it’s a big waste of money. but unfortunetly everyone else thinks its normal.
    you pay more than the car is worth thanks to interest meaning by the time you want to sell the car you are loosing even more money on the depreciasion. so instead of paying your bank, put a monthly instalment in your saving that is equal to the cars instalment minus the interest and tax on interest. after 3 years or so rather than 5-6 years you will have enough cash to buy a brand new car. couple that with 2500 euro or equivalent if they take your aging old car, then hell you get a segment upgrade….

    not sure why the world became a ses pool of credit seekers… what’s wrong with savings?

  • avatar
    Kurt.

    I think you have to look at this from different angles.

    First, cash for clunkers gets older vehicles off the road and folks into newer and supposedly cleaner vehicles. If you goal is to get more people into greener cars. This works.

    Conversley, it is a Robin Hood approach. A redistribution of wealth. The problem is that since the middle class pays the lions share of the tax, it is the middle class that is having the wealth redistributed. And if we are all paying the tax, then it come out in the wash…yes?

    I also believe that the rest of the world should do just as Germany does (in this case) and not produce a sea of cars. Most cars should be on an “order” basis. Picking one off the shelf lends to too much waste and fire sales at the end of the year.

  • avatar

    The really interesting this about this is that the scheme is actually self financing.

    Cash4clunker: €2.5K

    VAT rate: 19%

    If the car costs more than 13K: Government cash positive (it’s not that easy with VAT, but humor me…)

    Even with a €10K car, the net cost is €600

    Clunker removed, air cleaner, jobless benefits saved. What’s wrong with that?

  • avatar
    hazard

    Bertel is right in that a clunker rebate is essentially a VAT discount.

    In Serbia they’re offering a 1k euro clunker rebate (car must be non-EURO3, produced before 1999) if you go for a domestically assembled Fiat Punto mk.2 + you get a subsidised interest rate on your car loan.

    Base model costs 7k euros, so you with the rebate you get it for 6k euros. Of the sticker price, 1070 euros (18%) is VAT. So essentially, it’s a VAT rebate.

    The Puntos are sold out as a result and a further 9000 orders have been put in (last year’s production: 3-4 thousand).

  • avatar
    grog

    Just 2.5 Euros for the clunker turn-in reward?
    Yeah but with the exchange rate, that’s worth around $500 US.
    in Germany 2.500 € are by todays rate 3129,25 US$
    in Austria its 1.500 € coming to 1877,55 US$
    provided your firm in the very basic math
    In both cases – a decent sum

    I was joking and taking the original post of 2.5 euros literally while poking fun at the collapsing dollar.

  • avatar
    grog

    grog: Yeah but with the exchange rate, that’s worth around $500 US.

    We don’t call our currency the 21st Century lira for nothing.

    Wow, obviously you’ve been in a coma since last July. Whew, wait til you get caught up on the business news … I suggest you sit down first …

    Sit down because…..the dollar went from merely being worth nothing vs the euro to being worth nothing +1?

    Yeah, it’s gotten better. Still crappy.

  • avatar
    bluecon

    This is just a short term gimmick. You have the same problem as with the zero percent financing. Once that was implemented after 911 there was no way to go back to normal business and you pull future sales ahead. This is just a dead cat bounce.

    The way out of this mess is to cut government spending and taxes and that isn’t supported by the voters. And so the economy is going kaput.


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