April 17, 2009. Copyright 2009, Graphic News. All rights reserved Car sales slump, but government incentives spare Germany, France By Neil Winton LONDON, April 17, Graphic News: Western European car sales have slumped, but not all car markets and manufacturers are reeling, as the economic recession frightens some consumers into shutting their wallets for the duration. Some markets, notably in Germany, France and Italy, have been spared the worst of the pain because their governments have introduced so-called “Scrappage” schemes. In Germany, car buyers are given ‚Ǩ2,500 towards the cost of a new car, as long as they turn in their old ones at the knacker’s yard. While Automotive Industry Data shows that sales in Western Europe fell eight percent in the first quarter compared with the same period of 2008, the damage has not been spread evenly. “Scrapping scheme ‘Haves’ -- plus 18 percent, ‘Have Nots’ -- minus 30 percent,” said Citigroup Global Markets analyst John Lawson, describing the drastically different impact across Europe. In Britain, where the government has been agonising about introducing a “cash-for-clunkers” scheme since last November, sales dived 30 percent in the quarter. In Germany, Europe’s biggest market, sales actually rose 18 percent. In France, where the government has a less generous scheme than in Germany, sales fell just under four percent. In Spain though, where economic conditions are harshest, despite scrapping incentives, sales still plummeted more than 40 percent. The impact on manufacturers has also been inconsistent. Companies like Fiat of Italy, Germany’s Volkswagen, and Korean manufacturer Hyundai-Kia have seen their overall sales falls limited to single digits, as buyers frantically bought up stocks of cheap, small cars, making sure they beat the inevitable withdrawal of the subsidies. This is not all good news. Economists point out that these incentive schemes have simply bought forward sales which now won’t take place later. The pain is delayed, not cured. Also, profit margins on small cars are famously razor thin. Production lines and employment are being maintained, but with little benefit to companies. Premium car makers like Mercedes and BMW of Germany are suffering most as sales crater by at least 25 percent. Scrapping incentives are only a tiny percentage of the price of a luxury vehicle. Britain’s Jaguar Land Rover, maker of huge, expensive SUVs and gas guzzling luxury saloons, saw its sales dive more than 40 percent. Perversely, these scrapping schemes, which are also billed as being environmentally friendly because new, small cars are likely to be more fuel efficient than old clunkers, have not been universally admired by Greens. Environmental groups point out that a scheme like Germany’s, where cars over nine years old are eligible for the scrap heap, mean that vehicles with at least five more years of useful life are being prematurely destroyed, adding to the use of CO2-spewing factory processes to make new ones. The Brussels-based European Federation for Transport and Environment points out that Germany’s scheme is so loosely constructed that it is possible to use the scrapping inventive to junk your fuel-sipping little VW Fox and buy a humongous Porsche Cayenne SUV. /ENDS Additional data to go with GN24414 Passenger car sales by market (Provisional ACEA sales estimates) Market Jan-Mar Change in same 2009 period 2008 Germany 868,100 18.0% Italy 538,700 -19.1% France 505,500 -3.9% United Kingdom 480,300 -29.7% Spain 198,000 -43.1% Belgium 143,900 -15.3% Netherlands 125,200 -23.6% Poland 87,900 1.3% Austria 64,300 -12.9% Switzerland 58,800 -12.2% Greece 49,200 -37.9% Sweden 43,900 -29.0% Ireland 32,600 -65.0% Portugal 31,800 -42.4% Czech Republic 31,100 -5.8% Finland 29,500 -36.0% Romania 29,100 -60.7% Hungary 26,400 -33.7% Denmark 24,600 -37.6% Norway 19,200 -36.2% Slovenia 14,600 -22.3% Slovakiav 12,700 -18.6% Luxembourg 12,100 -10.4% Bulgaria 6,100 -48.3% Estonia 2,600 -63.9% Lithuania 1,900 -70.3% Latvia 1,300 -78.0% Iceland 300 -90.9% /ENDS