German Car Sales Are Having A Wrecking Ball

Stefanie Wolter’s wrecking yard is one of the largest in the northern part of Hesse, Germany. On an average day, they used to receive one or two cars to be euthanized. Now, suddenly, it’s ten. Clunkers are lining up, and the yard can’t kill them as fast as they come in. It’s a common sight in Germany. Wrecking yards are getting crushed under the load of cars to be crushed, Automobilwoche [sub] reports.

The attack of the aging automobiles is caused by the Abwrackprämie (cash for clunkers program) paid for by the German government. Since January 14th, 2009, owners of cars nine years or older can collect €2.5K if they put the pile of rust out of its misery, and buy a new one.

In the beginning, the program was ridiculed. It’s not going to work, said many, owners of clunkers won’t buy new. The Green Party said it’s “a joke.” Quickly, the mood changed.

Polk Germany prognosticated that the program would result in seven percent more sales than in 2008—that’s 200K units. A few days later, a new study said 1.2m people would buy a new car because of the Abwrackprämie. Too good to be true, given that barely 3m new cars were sold in 2008, with gruesome losses in Q4 08 and an awful January.

Then, dealers reported unusual sightings: Buyers in showrooms.

Suddenly, rumors and news articles spread that the €1.5b, enough for 600K cars, wouldn’t last long. Which caused an even bigger run on the showrooms.

The naysayers complained that only cheap imports would profit from the bounty on dead clunkers. On short notice, the market proved them wrong.

Ford reported four times higher sales for its Fiesta, Ka, and Fusion models.

Volkswagen uttered a long forgotten word: “Lieferzeiten”— waiting times for new cars. Buyers of small cars like Fox and Polo, but also of the lower middle class of VeeDub’s portfolio have to wait up to four weeks until they get their new ride.

Even GM’s Opel, pronounced to be near dead, suddenly jumped off the gurney, shouted “I can walk!” and reported 70 percent higher sales of the Corsa and 30 percent higher sales of the Astra. Assembly lines in Eisenach, planned to be shut down in March, will be cranking out cars.

Cars like Renault’s Dacia are flying out of the door and are in short supply.

And the program is just a few weeks old.

The German government apparently pulled off a rare feat: A program that works. €2.5K has enough oomph to make people sit up and think: “Maybe I buy a new car.” Some folks at wrecking yards are even crushed by the thought that they have to kill cars which still have a good life in them. Off they go. Poor people suddenly feel rich: They bought a 12 year old clunker four years ago for €1.5K, now they see its value increase by a thousand Euro.

And then, there is the most unusual sight: Smiles on the faces of car dealers.

Next week, Detroit will come begging again. Send them home empty handed. Give a $5000 check to each American who sacrifices his old clunker for a new one. At 790 cars per 1000 people, there should be not shortage of candidates.