German Clunker Culling With Hidden Gotchas
The German clunker culling initiative appears to work. Dealers report increased traffic. According to two independent surveys, one by BKP Consulting and one by Ernst & Young, 30 percent of the surveyed said they would buy a new car due to the clunker culling money, Das Autohaus reports. There are no exact sales data yet. However, both dealers and wrecking yards report increased traffic. The German car interest group VDA revised its prior prognosis of 2.9m units sold in 2009 up to slightly over 3m. Germans will receive €2.5K if they buy a new car, or a car no older than one year that was registered to a dealer or auto manufacturer – German lawmakers are sensitive to the shenanigans of automakers who increase their sales statistics by registering the car in their name or the name of the dealer. The clunker must be at least nine years old and must be scrapped.
The idea is not new. It was first launched in France, where people get €1K if they scrap a car that is at least 10 years old and buy a new one. Austria already announced a similar one. Austria pays €1.5K for scrapped cars older than 13 years. It is to be expected that most of Europe will jump on the clunker culling bandwagon, each with different conditions. The German program is not without its critics.
It’s greenwashed; the new car must be at least Euro IV compliant. However, Euro IV has been in effect since 2005. A new car that is not Euro IV compliant would be illegal anyway. There is no CO2 limitation.
The German regulation also isn’t finalized. There are doubts how it works exactly. The government allocated €1.5b for the program, when the budget is exhausted, they will be no more payments. The budget lasts for 600K cars.
According to another (we’d say, very optimistic) study, also quoted by Autohaus, 1.2m people plan to scrap their old car, take the money and buy a new one. The German media urges people to act fast. Nobody tells them that total car sales in Germany were 3m in 2008.
On the other hand, there is no shortage of clunkers in Deutschland. Germany has more the 50m cars on the road, and the average age is 8.4 years. Theoretically, approximately 25m cars would qualify. However, holders of clunkers usually buy another clunker, and rarely buy new.
Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.
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@Paul: Yes you are! And we love you for that. If you have it serviced at the new car dealer through its life and not deserted to Pep Boys or Meinecke after the warranty expired, then you are the dream customer. @everybody: I called some German dealers I know. They report a definitive uptick of traffic, caused by the clunker culling. High interest in low cost models, where the €2.5K makes a difference. Next to no action in the higher priced segments. Sales people report that a lot of customers leave empty handed, because they are shocked that the 2.5K covers only a part of the price and there still are payments left . But that's salespeople, they always complain ....
Bertel, I avoid dealers like the plague, unless its warranty work. If it ain't broke, don't fix it, that's my motto.