No Polish Cars, Please - We're British

The United Kingdom always had been a reluctant—and sometimes recalcitrant—member of the EU. Some of Her Majesty’s subjects still refuse to fully accept the EU’s existence. This may explain why our colleagues at Autocar.uk found it worthy to note that “the unexpectedly high take-up of the German government’s scrappage scheme has led to an unexpected side effect—a boost to new car sales in Poland. The combination of the fact that the German scheme doesn’t require the new cars to be purchased within Germany, and the weakness of the Polish zloty—which has fallen by around a third against the euro in the past year—has resulted in more than 10 per cent of new cars sold in Poland being bought by Germans.” And what’s wrong with that?

The side effect is everything but unexpected, and nobody forgot to make it law that the car must be bought in Germany to qualify for the hugely successful Abwrackprämie. Such a law would be against the law. The EU is a common market, its citizens (and car dealers) have the right to buy wherever they like. Attempts of car manufacturers to stop “grey imports” trigger harsh punishment from Brussels. In 1998, Volkswagen had to pay a fine of 200M Deutschmarks (there was no Euro at the time) for messing with free European trade. With the new Block Exemption Regulation that went into effect in 2003, consumers and dealers received the right to buy their cars anywhere in the EU. The manufacturer has to honor the warranty and risks the wrath of Brussels if he balks. Most of the new cars bought in Poland by Germans are likely bought by German car dealers for resale in Germany.

Poland is part of the EU, but its currency is not the Euro. They wish it were. Last year, one Euro bought 3.19 Polish zlotys; currently, a Euro is worth 4.50 zlotys. A few weeks ago, a Euro bought nearly 5 zlotys. In Euro terms, buying in Poland is cheap, which is good for the Polish industry. Reuters says that “new car sales in Poland rose 1.2 percent in the first quarter to nearly 88,000, according to auto research agency Samar, which pinned the gains on buyers from Germany and Slovakia, which also has adopted the euro and has introduced incentives to encourage new vehicle purchases. Poles alone bought 6 percent fewer cars in the first two months of the year than in the same period of 2008.”

The combined effect of the Abwrackprämien boom and the currency rates extends far beyond some Germans buying their Golf across the Polish border—which nobody notices anymore since Poland joined the Schengen Agreement in 2007 and closed all border stations with the EU. According to Industry Week, the increase in car sales in Germany has had the knock-on effect of boosting factories producing small cars in Poland destined for sale on the German market. “Our factory in Tychy, producing the Panda model, the Fiat 500 and Fiat 600, is working at full steam,” said Fiat Auto Poland spokesman, Boguslaw Cieslar. Volkswagen factories in Poznan, Poland, are also “working flat out with order books full for the next three to four months,” said Volkswagen spokesman, Piotr Danielewicz. The Abwrackprämien boom benefits factories in all parts of Europe which work overtime to feed the German beast.

Too bad that the UK doesn’t (PTFOA, take note) have much of an auto industry left. Otherwise, they could have profited more than the Poles. The British pound (the UK isn’t part of the Eurozone either) lost a huge part of its value against the Euro. In January ’07, a Euro bought 0.65 Pounds. Today, a Euro buys 0.9 Pounds. But wait, they have the steering wheel on the wrong side, so European shoppers take their converted Euros to Harrod’s and Selfridge’s instead.