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German scrappage incentive runs out of cash

Government funding for the German car scrappage incentive has run out, marking an end to a scheme that has provided a much-needed boost to car sales. The 5bn-euro ($7.1bn; £4.4bn) scheme has encouraged almost two million motorists to scrap their old car and exchange it for a new one.

The scheme helped boost car sales by 28% in August compared with a year ago but there are concerns that car sales will now fall sharply without the government funded incentives.

The German scheme has been so successful that analysts have said increased car sales played a part in the economy’s exit from recession in the second quarter.

“The car-scrapping programme developed into an effective support and stabiliser for the German economy,” said Arnold Wallraff at the Federal Office of Economics and Export Control (BAFA).

Under the car-scrapping scheme, German motorists were paid 2,500 euros for turning in a car which was at least nine years old in exchange for a vehicle that was no more than a year old.

Car sales rose to 10-year highs earlier this year, which spurred the government to increase funding from the original 1.5bn euros to 5bn euros in April.

BAFA said it had set up a waiting list for 15,000 people if existing applications were turned down.

The German car industry, like those in other countries across the world, has been struggling to cope with a dramatic slump in sales during the economic downturn.

Source: BBC News

Sep 2, 2009MTI
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