By on May 6, 2010

The predominant critique of the cash-for-clunkers programs that have proven so popular in the US and Europe is that they cause unsustainable demand bubbles which cause sales to collapse after they expire. Sure enough, a look at the German market’s Q1 performance shows that the OEMs who most benefited from the program (primarily firms who focus on low-cost cars) are seeing far more significant declines than US-market firms have seen. In the first three months of this year, firms like Hyundai (-40%), Fiat (-58%), Suzuki (-54.6%) and Kia (-49.4%) have been suffering mightily from a hangover caused by the world’s most generous cash-for-clunker program. But the big news isn’t this small-car bust: it’s the fact that these firms’ success last year have caused the percentage of cars on German roads with electronic stability programs (ESP/ESC) to fall.

The April print edition of Auto Motor und Sport reveals that the percentage of ESP-equipped new car sales in Germany fell three percent in 2009 compared to 2008. Based on national insurance data, the magazine figures 78 percent of all vehicles sold last year had ESP equipped, but that 190k vehicles were sold without the safety equipment. This goes against long-standing trends that were driving German-market ESP-equipped percentages inexorably upwards: in 2006 only 58 percent of all nameplates on the German market had ESP as standard equipment, while last year a full 74 percent offered ESP as standard. The difference is that, by stimulating demand for the most stripped versions of the cheapest cars on the market, Germany’s C4C program incentivized consumers to buy non-ESP-equipped vehicles.

Granted, a three percent decline will hardly have the most dramatic effect on national highway safety in Germany. What this unintended consequence does bear on, however, is an EU-wide effort to make ESP standard on all vehicles. By 2012, the EU will require all new vehicle lines and commercial vehicles to come equipped with ESP, and by 2014 it will require that every vehicle sold in Europe be equipped with ESP. In the US, standard ESP will be mandatory for all new vehicles sold starting in 2012. The European Union has regularly bemoaned the fact that Europe lags behind NAFTA on ESP adoption rates, arguing that the deficit costs thousands of lives and millions of dollars.

With Germany’s cash-for-clunkers program now expired (after spending about $7b), it’s safe to assume that consumer safety concerns and government regulation will more than make up for the slide in ESP adoption caused by the program. Still, it’s likely that the EU will remember this decline in safety, and discourage any future clunker programs until mandatory ESP fitting becomes law in 2014. But then, if the German market hasn’t stabilized by then and needs additional assistance, the clunker hangover will have been far greater than even the most jaded skeptics had predicted.

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11 Comments on “German Clunker Scheme Reduces Safety Equipment...”

  • avatar

    Can anyone tell how a sedan with ESP would feel different than one with ABS and traction control? I always thought ESP was for SUVs and CUVs.

    Than again, I’m driving a fleet of cars from early Oh-Ohs and had yet to expereince the ESP.

    • 0 avatar

      Try this: get up to a decent speed on a slippery surface and try to perform an emergency avoidance maneuver at as fast a speed as your car can manage. Most vehicles will plow or swing out the rear end; now, try to react to either eventuality the wrong way.

      ESC should slap you back on course.

      The benefit to ESC is less in lower vehicles, but it’s still there, and it’s certainly useful for keeping drivers in the lane they intend to be in. Even if you might be a good driver, there’s a lot to be said for anything the helps the guy in the next lane over do the same.

  • avatar

    Have ESP systems been found statistically to increase safety? I know that ABS systems have not demonstrated such.

    • 0 avatar

      Put it this way: the IIHS is heavily promoting ESC.

      If the insurance companies think it’s a good idea, there’s probably a demonstrable correlation between having it and the claims they have to pay

    • 0 avatar

      psar, did the IIHS not push ABS systems as well when they were first introduced?

    • 0 avatar

      ABS systems did not reduce accident rates; did they help with severity? Don’t know, but maybe the B&B has some data on that. ESC was demonstrated to be quite effective with reducing rollovers of SUVs in tests but was less so in the real world. Still, the real world results were good enough IIRC to mandate their use. I read somewhere that “compensating behavior” is partly to blame for the difference in tests and the real world. The idea is that if you feel more secure, you are more likely to commit more risky acts. I don’t totally buy that, but there is probably some truth to that…

  • avatar
    Uncle Mellow

    Since the ESP/ESC systems fitted to small VW and BMW models are commonly failing after three years , I can’t see this making much difference. In any case , people with cars fitted with these systems often drive beyond the limits at which they can control the car , taking away any extra safety factor. I have been driving an ABS equiped car for the last six years , and I only experienced the system working within the last few months , because of the exceptionally bad winter weather.

  • avatar

    I’m generally not in favor of mandated safety aids, but I make an exception for stability control. It is AMAZINGLY effective. My ’08 Saab 9-3 has it, and I went out last winter to explore the limits as I always do with a new-to-me car. Simply astounding how much higher the control limits are with the system on than off. I want everyone around me to have this on slippery days, especially the idiots too dumb to use proper snow tires. Especially the idiots who think AWD is a substitute for snow tires. They may not stop, but at least they will be a little more likely to stay in thier own lane on a curve.

  • avatar

    I’m sorry, how did everyone get along without ESP for the last 80 years? I guess people will die too if you take their cell phones away.

  • avatar

    I don’t understand hwo the number of VSC vehicles went down assuming almost all cars that were traded in didn’t have VSC. unless the majority of people traded in their 10 year old volvo V 70 to buy a Kia Rio without VSC.

    there always will be the argument that people could drive without ABS, VSC. but there were more accidents (despite less traffic than now). the same way I also could take your AC away and say 80 years ago people could live without AC. Same with seat belts. etc.

    Sometimes mandates are necessary. Especially as long as people spend a $ 2000 on alloy wheels, but want to save $ 50 on ABS. For general society it is better when those people survive or avoid an accident.

    VSC is not that expensive. R&D expenses are paid for. It uses the existing ABS sensors. Of course, as an option they take you to the cleaners. but if it is standard it should even get cheaper.

    • 0 avatar

      Good point!

      However, down here ABS doesn’t cost 50USD. Try something like 2000USD. For that kind of money I prefer AC and alaarm. Much more useful here.

      And yes I’m a 3rd world brat (tongue in cheeck!) So I don’t need no stinkin’ airbags.

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