Tuesday, March 3, 2009

USA Today: German Auto Sales Boom to 10 Year High Due to Government Scrap Bonus

Ah the market reversed back down already - another headfake. You cannot be bullish for 10 minutes ... brutal action for longs. Just brutal.


I told you I am on the lookout for good news. I'm searching the globe! Found this interesting story on German car sales - I *thought* (living in the Detroit area) I heard of a similar ploy in the U.S.; not sure if it was supposed to be part of the stimulus plan or a stand alone. Frankly, it's just a direct subsidy to car makers disguised as a rebate check but hey, it seems to be working in Germany. Surprised Obama has not latched onto this since you could make an environmental case to boot (older cars being less Earth friendly)
  • Auto sales in Germany last month boomed to their highest level in 10 years, spurred by the German goverment's bonus to people who scrap older cars and buy new ones, an industry group said Tuesday. Germany's 2,500 euro incentive is part of a wider 50 billion euro economic stimulus plan.
  • New-car registrations in Germany were up more than 21% to 277,800 in February compared with the same month last year, VDA said. It was the highest February sales level for 10 years and the first time in more than six months that sales have grown, said Matthias Wissmann, VDA chairman.
  • Germany's goverment discounts for new-car buyers is Europe's most generous — 2,500 euros, or $3,134 at Tuesday's exchange rate. A buyer has to trade in a car at least 9 years old and agree to let it be scrapped.
  • Other European countries offer similar discounts, but those range as low as 1,500 euros.
  • The program not only whips up auto sales, it boosts tax revenue. And because it scraps an older car for every new one, it tends to boost fuel economy and cut tailpipe emissions.
  • The U.S. has balked at direct-to-buyer programs. It limits new-car purchase incentives to a tax deduction for the amount of sales tax on the new-car purchase — a benefit worth only a few hundred dollars, at best.
As the economy continues to tank, I'd expect to see something like this in the next stimulus - which should be headed our way by next winter.

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