[GTO]

In an extremely innovative gesture of providing stimulus to the troubled car industry, the German Govt. is handing out cash incentives (Euro 2500 = Approx 1.7 lakh rupees) to car owners for upgrading their 9+ year old car. This move led to a whopping 22% increase in month-on-month sales (February 2009). A budget of 1.5 million Euro has been allocated, which will allow for about 600,000 incentives to be handed out.

Half of German car scrapping premiums spoken for < Local News | Expatica Germany

[condor]

So what are they doing with all those 9+ yr old Merc's, BMW's etc ?

[FlyingSpur]

Fantastic. Should affect prices in the used car market directly. I'd say quite a smart move, although moving even more towards consumerism if I may say so.

By the way, nine-year old or older Mercs, are you guys thinking the same thing as me? I suggest team-bhp takes a little field trip to Germany and picks up all those W124's while will now be available !!

[diffsoft]

What is innovative about handing out freebies? I pity the honest tax payers whose money is treated as easy money; such interventions distort true market picture and increase moral hazard.

Cheers,

[mmmjgm]

Originally Posted by diffsoft

What is innovative about handing out freebies? I pity the honest tax payers whose money is treated as easy money; such interventions distort true market picture and increase moral hazard.

Cheers,

Diffsoft, i doubt that could be possible, you might hold the Indian legal/financial machinery in perspective. The laws and administration systems in Germany would not leave anything to chance, for example the government already has the car registration details with them, they have the requisite information. I doubt they would have come up with an ad hoc policy.

Meanwhile it's heartening to know that countries take up such measures, alas for us Indians, its confronting the code of Conduct for elections.

cheers
M

[srishiva]

Wasn't this scheme started to get old vehicles off the road to clean up emissions? I have heard that people are buying more fuel efficient smaller cars with this money.

[V-16]

A good way to get the wheels of sales moving on in times of recession. I think its a great way to also get older cars out of circulation and contribute to keeping emission laes in check. In countries such as Germany and also in most of the western countries, road travel is a very widely used option therefore these cars would have clocked considerable numbers in terms of mileage.

That means that the customers would have to pay the price of a new vehicle in a trade off option and get a 2500 Euro discount on the price. The customers can now get their old car sold off too, in a difficult market. Good marketing strategy.

[PAVAN KADAM]

Originally Posted by GTO

In an extremely innovative gesture of providing stimulus to the troubled car industry, the German Govt. is handing out cash incentives (Euro 2500 = Approx 1.7 lakh rupees) to car owners for upgrading their 9+ year old car. This move led to a whopping 22% increase in month-on-month sales (February 2009). A budget of 1.5 million Euro has been allocated, which will allow for about 600,000 incentives to be handed out.

Half of German car scrapping premiums spoken for < Local News | Expatica Germany

, Thats what happens when you develop most reliable cars in the world.

Its damn difficult to get rid of German cars less than 50 yrs lifespan.

[MileCruncher]

Even though this policy has been implemented to boost up the German Manufacturing industry, I'm not too sure how well this would work because of the following:

1. Mostly who still have 9+ year old cars as their primary vehicle would be SEC C and below. These are the people who are the worst affected in this recession and donot exactly have liquidity to buy new cars.
2. Most people are downgrading rather than upgrading in this difficult climate. So this policy will only help VW and the Jap and Korean cars rather than MB/BMW and other marques.
3. This subsidy is to tempt people to spend wherein again non-credit worthy people will get credit. Another disaster in the making.
4. I feel the west should learn to save rather than be leveraged many times over. This policy is against that principle.

This sounds like the old saying of Marie Antoinette "If you don't have bread, eat cake"

[diffsoft]

Originally Posted by PAVAN KADAM

, Its damn difficult to get rid of German cars less than 50 yrs lifespan.

I guess you are waiting to lay your hands at some of those machines!

Originally Posted by mmmjgm

Diffsoft, i doubt that could be possible, you might hold the Indian legal/financial machinery in perspective. The laws and administration systems in Germany would not leave anything to chance, for example the government already has the car registration details with them, they have the requisite information. I doubt they would have come up with an ad hoc policy.
M

I am saying that the cash incentives handed over by the Govt finally comes from the tax payers - the Govt's source of revenue. Why should a tax payer's money go to folks who have cars more than 9 years old?

On the other hand those who get this money because they were holding 9 year old cars got this money for "free" as if it were suddenly found on the road one day, which they are likely to see less value in (economists call this the problem of "moral hazard" - akin to you are more likely to damage a car if you know it's covered vs. not). You see it in India when our politicians give free power!

I agree chances people honestly pay taxes in Germany is higher than in India

Cheers,

[PAVAN KADAM]

Originally Posted by diffsoft

I guess you are waiting to lay your hands at some of those machines!
Cheers,

Dude,

I already own two German beauties.

1) 1967 1500 VW Beetle.
2) 1972 1600 VW Microbus.

Hence i swear by their reliability.

[vipul_singh]

Some experts have said that this is likely to artificially depress the car market for the years to come, since a sizable chunk of the market would have bought new cars, which may then be expected to last for (say) five years.

On balance, though, it may be good (in the short-term) for car-makers struggling with fixed costs and inventory.

[devarshi84]

This was supposed to lift Opel and the Govt's promotional scheme did everything but help Opel. :P look at the Growth rate of Opel compared to other companies.

[diffsoft]

Originally Posted by vipul_singh

On balance, though, it may be good (in the short-term) for car-makers struggling with fixed costs and inventory.

If such were the case then the car makers will offer discounts and liquidate. State intervention may appear to help cure the symptom (jump start sales), but the cause will remain (depressed demand). It has been argued that one of the reasons for the downfall of GM (whose Market Cap at one stage was less than Maruti) was state intervention at all levels - huge pensions, laws prohibiting easy removal of dealers etc. Further GM was continuously propping demand by giving HUGE discounts on its cars for many years, depressing the value of its cars and creating artificial demand by artificial pricing. When the bubble burst demand fell of the cliff (about 25% or so down yoy). So essentially what GM did was to advance demand by offering discounts - natural demand does not change! And now it is trying to fund its "sins" by tax payers money or Govt bail out!

As an aside, what I truly find ironic is that big preachers of free trade to developing nations rush to intervention when their own house is in disorder!

Cheers,

[mmmjgm]

Originally Posted by diffsoft

I am saying that the cash incentives handed over by the Govt finally comes from the tax payers - the Govt's source of revenue. Why should a tax payer's money go to folks who have cars more than 9 years old?

On the other hand those who get this money because they were holding 9 year old cars got this money for "free" as if it were suddenly found on the road one day, which they are likely to see less value in (economists call this the problem of "moral hazard" - akin to you are more likely to damage a car if you know it's covered vs. not). You see it in India when our politicians give free power!

Well how a government manages funds during crunch time is completely upon them.

This initiative taken by the German government is to resuscitate a slowing economy, as you are aware cars are an important macroeconomic parameter.

Well as far as tax payer's money is concerned, once its paid into the tax coffers the government can do what it well deserves with it.

By providing an impetus to new car buyers whose cars have most probably reached a stage where they may not be eco friendly and provide stimulus to the economy.

Also do note that the government earns a bit from taxes on new vehicles. So probably you may need to factor that in as well. 6 lakh cars means continuity of employment to the entire manufacturing chain as well as steel, petroleum, plastics etc.

Cheers