Dacia Eats Up German Cash for Clunker Bucks

Martin Schwoerer
by Martin Schwoerer

Renault’s low cost, made-in-Romania Dacia brand can’t believe its luck. In Germany, orders are upsixfold says the Financial Times Deutschland. Due to demand stoked by the Euro 2,500.00 clunker car program, sales have taken off for low-cost cars. The newish, normal-looking Dacia Sandero usually sells around 80 units per week. Suddenly, they’re moving 1k. Unfortunately, Dacia lowered production at its Romanian plant weeks ago, in expectation of collapsing Russian and Eastern-European markets. The cars are so sold out—to the point where Dacia is buying cars off the Russian market to satisfy German demand. Dealers are rubbing hands and hiring helpers: a German dealer has students serving coffee to customers waiting in line to order cars.

Positives: it’s good to hear of a car maker that can uphold a profit margin of six percent even in bad times. The more that money goes to Romania, the less will be needed to support ailing banks in Transylvania. And the Dacia is not a bad car, for the money. More to the clunker-culling policy point, there are hundreds of thousands of poorish people who drive to work every day, need a car, but can’t afford to replace a 15-year old heap. For them, what amounts to a once-in-a-generation opportunity to buy a new car (for €5k) is a blessing.

Negatives: it sounds like the making of a manic-depressive market to me. Boom now, tears soon: we’ve heard that story before.

Martin Schwoerer
Martin Schwoerer

More by Martin Schwoerer

Join the conversation
4 of 16 comments
  • Bertel Schmitt Bertel Schmitt on Feb 13, 2009

    This is a relatively cheap (€1.5b) program that creates a lot of excitement, dealer traffic and sales. It gets old cars off the road and people into showrooms that otherwise wouldn't be there. It also makes manufacturers think building affordable cars. Definitely better than dumping tax payer money down bottomless pits. Of course the program favors smaller cars, because €2.5K make a bigger impact on a €10K car than on a €100K Merc. And that's an intended consequence. It favors those small and affordable cars, no matter where they come from. Romania, Japan, Korea, Germany, Italy. Hats off to an absence of myopia.

  • John Horner John Horner on Feb 14, 2009

    "Of course the program favors smaller cars..." Unlike the provision the US Senate recently put in the stimulus package to make sales tax on new vehicles tax deductible. Ta da, a big benefit for those buying $100,000 vehicles, but very little for Aveo buyers. In our part of California the sales tax is 8.25%, or $8,250 on a $100,000 vehicle. Buyers of such vehicles are probably in the 35% marginal tax bracket, so 35% of $8,250 = $2,888. Unfortunately, giving that person a tax break probably doesn't add much economic activity as anyone with the bucks for a $100k new car/truck in this economy will make their purchase decision independent of the value of a relatively obscure tax break. If you are going to use tax breaks or credits to incentivize car sales, a well crafted clunker credit makes far more sense than the sales tax break.

  • Steven Lang Steven Lang on Feb 14, 2009

    Yeah and no. A clunker credit can definitely create activity on the lower end of the scale. The problem we have in North America is that overproduction has taken place for such a long period of time, we may never see anything more than a little bump. A similar phenomena is taking place with the tax refunds. People are actually putting most of that money towards used cars instead of new ones. The value differential between the two is simply too great these days for most folks to buy new.

  • Threeer Threeer on Feb 14, 2009

    guys, we already have small cars similar in nature to the Dacia here in the States. Problem is, nobody here really wants small, decontented cars. We like 'em big over here (as idiotic as that is for the actual usage of the majority of the cars on the road). I'd not mind a simple, honest and fun car like this. Reminds me of my 89 CRX Si. Simple and immensely fun. Too bad all we want is Tahoes, Yukons and such (that is, when we're actually buying anything).