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Government incentive program continues to pay off
The German government’s incentive plan to get its citizens buying cars continues to be a success with sales of new vehicles up 19 percent over the same period last year.
In total 380,000 units were sold, as people cashed-in on the government’s scrappage plan that provides 2,500 Euros (or roughly $3,200) towards a new vehicle when you send your 9-year-old (or older) car to the scrap yard.
The 19 percent increase follows an even more impressive 40 percent surge in sales in the month of March, bringing the yearly total to it’s highest level since 1999 – the current sales record.
Meanwhile, Germany’s European neighbors suffered losses, with Italian and French car sales down 7.5 and 7 percent respectively, while Spanish car sales plummeted 45.6 percent. Both Italy and France are offering incentives while the Spanish government has so far refused to.
The German government launched its scrappage plan in February and has since increased funding for the project from 1.5 billion Euros to 5 billion Euros, to ensure it can run until the end of ’09.
The Obama administration has repeated that it is looking in to a scrappage plan to boost U.S. auto sales but no plan has yet to be put in place.
[Source: Automotive News]
Trust the Germans to do something right. When the German government recently passed its own economic bailout plan, they created a way to boost the German car market through an incentive that is genuinely enticing.
Rather than offer small tax cuts or mild incentives, the German government is guaranteeing 2,500 Euros (roughly $3,200) towards anyone who wants to purchase a new car. Well, not quite anyone.
The rules strictly stipulate that anyone who scraps their 9-year-old or older vehicle will receive $3,200 towards a new (or one year old) vehicle. (The 9-year-old vehicle also has to have been registered in Germany for one year or more).
The plan is also an environmentally conscious one as getting old vehicles of the road and replacing them with newer more fuel-efficient and less polluting vehicles helps reduce greenhouse gasses.
One of the most surprising things about the new offer is that it applies to all cars, not just German made ones.
On top of other incentives offered by German manufacturers this can mean a savings by as much as a fifth of the price of the vehicle.
According to a report by the CBC, the plan seems to be working. While the German government isn’t willing to reveal any numbers as of yet the scrapyard business is booming, with some scrapyards reporting an increase in business of 200 to 300 percent.
The German government also seems to have high hopes as almost $2 billion has been earmarked for the scrap car plan.
The almost three-week-old program has $2.4 billion worth of bonuses earmarked, but a spokeswoman at the Ministry of the Economy could not say how many applications had been received.