Abwrackprmie 10 – Carmageddon 0
You want unintended consequences? You’ve got unintended consequences: The German Abwrackprämie is turning into an eruption of Mt. St. Helens proportions. When the German government launched their cash4clunkers boondoggle two months ago, the lawmakers earmarked €1.5 bn to pay for the program. At a rate of €2.5K for each German jalopy put out of its misery (exchanged for a brand new one), the money should have lasted for 600K cars. Mind you, the German new car market stands now at around 3 million annually, so 20 percent on top of that was seen as a goal to which nobody dreamed of aspiring. Now, Germany finds itself in the grips of the Abwrackprämien virus that’s spreading faster than the winter flu.
The Bundesamt für Wirtschaft und Ausfuhrkontrolle (BAFA) which administers the program is drowning in paperwork. When the program had reached more than 470K applications, the program was put on-line. Then it exploded.
As of April 3, 471K applications were filed in paper form, followed by a tsunami of 688K applications filed on-line. That’s well over a million, already one third of Germany’s annual auto sales. And there’s no end in sight.
[Real time-ish statistics can be obtained here. The blue bar is the old style paper applications, the red bar reflects the on-line applications.]
There are suspicions that people might have done a little double filing (on paper and on-line). Others may just have reserved their Abwrackprämie for the heck of it. Be that as it may, Germany could turn millions of clunkers into new cars and create a new car boom never seen since Germany’s reunification 1990.
Obviously, the allocated €1.5 bn is already spent. Germany’s government has informed the populace that their coveted Abwrackprämie is safe at least until end of May. And why not? The program is pretty much self financing; German VAT is 19 percent. If a new car costs more than €13K, the government is in the green.
What’s next? Discussions range from paying the full monty throughout 2009 to phasing it out slowly, das Autohaus reports.
More unintended consequences: The parts market is swamped with cheap used and/or reconditioned parts, extracted from the clunkers before crushing. Which is good for people who want low cost parts, but not so good for people who are in the parts business, such as yours truly.
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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And if they bought new and the old cars are crushed now they no longer have old cars that need repairing. The part resale market is affected in many ways. Actually me and Friedman agree. Small government is the way to go.