Abwrackprmie Invades The Old Blimey
The Right Honorary Lord Mandelson, her Majesty’s Secretary of State for Business, Enterprise & Regulatory Reform, is preparing to give £2K (€2160) to UK citizens who scrap their old car and buy a new one, London’s Times reports.
“Under the proposed stimulus package, drivers would be able to turn in their car, which must be at least nine years old, and get a £2,000 discount on the purchase of any new or one-year-old car bought at a dealership in Britain. The motorists would have to deliver their old vehicles to one of a number of car recycling plants and receive a confirmation certificate. They would present this to a car dealer and get the government-funded £2,000 discount. Motorists would be able to purchase any brand of car.”
The British “scrappage scheme” sounds very much like the German Abwrackprämie, except that it pays a few hundred Euro less, and also has a little less red tape attached to it. The two could be twins . . .
Trade Minister, Lord Davies of Abersoch, admits that they got the idea from the bloody huns. In an interview with The Times, he said: “The scrappage scheme has potential. It’s been tried in other countries . . . we’re looking at it very closely.”
According to the Times, “there has been a surge in new car sales in Germany since the introduction of a similar €2,500 scheme.” Let’s call this British understatement. The German car market surged 21 percent in February. Car makers are running special shifts. According to the German magazine Der Spiegel, “the Abwrackprämie may enter history as the most successful administrative act of the grand coalition. Rarely has a supportive measure elicited hysterical reactions like this one: Car dealerships are getting mobbed, inventories of some automakers are running on empty.” Indeed, many German car dealerships can’t keep up with the demand. The order systems of major automakers reportedly have crashed several times.
More than 230K applications have already been filed (actually, it’s 241,280 as of today,) another 200K are in the pipeline, says the Zentralverband des Deutschen Kfz-Gewerbes (ZDK) the German interest group of the auto trade.
Click here for day-by-day, play-by-play statistics of the Abwrackprämie.
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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FWIW Im sure I could find a new home for every 03 and newer Saab/Opel turbodiesel halfcut.
This is not a particularly well thought through idea in the UK, just like it's not in Germany. I might get a lot of flaming and fingers pointing to how it works but bear with me for a second. This initiative brings in some people, who would otherwise not look at purchasing a new car into a new car dealership for the firsttime, since the prices of new cars suddenly become affordable. So far so good. What the Germans are hoping is that the total market size will be increased as a result, on a PERMANENT basis. Let's examine this - from a purely theoretical perspective. The average car age in Germany is just short of 9 years. Given that sales levels have been pretty much flat (+/- 5% annually) since 2000 and some other data on the car pool from earlier on (which can all be obtained from the KBA for free) the distribution is relatively flat and around half of the cars are more than 9 years old (IIRC). That is ca. 23 million cars in Germany. A large part of those 23 million will be worth significantly less than even the cheapest new car, with a discount and an Abwrackpraemie. Hence you might have 2-3 million buyers, who could potentially qualify - and that is stretching it quite a bit already. In the short run bringing them into the markethas benefits - it keeps the balance sheets of car manufacturers healthier and makes sure the supplier base survives for a bit longer. The problem is that sooner or later those buyers will get exhausted, and given that they previously drove cars for quite some time, or had very old and cheap ones, they will drive those cars for a very long period of time - so they will not return to the market any time soon - next 8 years is probably a good estimate. So by boosting the market temporarily you will lower replacement rates for the foreseeable future. As I said, this can work and could make sense but only under one condition. Namely that the automotive industry sees this for what it is and downsizes dramatically over the next 3 years (better to do it even sooner). To around 65% of current capacity. In that case a bridge is provided to them towards a sustainable future. If this does not happen, it's just a very dragonfly like maneuvre - eating your own bodyparts when hungry. Yes, they will feed you now but you will also sorely miss them afterwards. Another qualifier why this should not be tried in the UK, even if it works in Germany is the state of indebtedness. This is fairly low in Germany and people generally tend not to slide into massive overspending. In the UK it's at breaking point with massive numbers sliding into negative net worth on a monthly basis. Encouraging them towards further spending is one of the most irresponsible things government can do at the moment.