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Worldwide Scrappage Scheme Update

Worldwide Scrappage Scheme UpdateAs the German Scrappage scheme comes to an end as the government funding runs out, we take a look at the worldwide impact of similar campaigns that have been running around the world.

France launch first European Scrappage

The French government were the first to introduce a cash incentive for the trade-in of older vehicles against new ones in December 2008 and have decided to extend their scheme into 2011 despite being due to end this December.  The scheme has seen positive results, with the French car market having grown 1.1 in 2009, compared to the first eight months of the previous year.  The sales of cars in France have continued to increase in four consecutive months since May with new cars up by 7% in August.  European car manufacturers have benefited the most, with the Renault and Fiat seeing sales increases of 10% and 19% respectively.  Drivers were paid a 1,000 euro cash incentive under the French scrappage scheme to replace their old cars and 250,000 drivers have so far taken advantage, costing the French government 390m euros so far.

Germany Scrappage

The German government committed £4.4bn (5bn euros) to boosting the sales of new cars, even extending the scheme when the initial funding ran out.  German drivers were paid 2,500 euros for scrapping cars over nine years old towards the purchase of a car that was less than a year old.  Ultimately, over 15,000 applications won’t be fulfilled as the scheme funding ended, although analysis can’t argue that it was ultimately a success.  The scheme helped boost car sales by 28% in August 2009 compared to 2008.  Volkswagen benefited from high sales in its local market seeing high sales of it’s Polo, despite the car being manufactured in Spain.  Experts claim that it’s been so successful that it will play a major role in Germany’s recovery from the worldwide recession.  The government have ruled out a further extension of the scheme however.

UK Scrappage Scheme

The UK government committed £3m to the scheme offering car buyers cash incentives of £2,000 towards the trade in of cars over 10 years old towards a new vehicle.  Half of the incentive payments were made from car manufacturers themselves.  UK car sales saw a boost of 2.4% in July compared to 2008 with nearly half of the 300,000 possible sales having been made by the end of August.  As a result many Asian car manufacturers gained increases in sales in the UK as car buyers turned to smaller, more fuel efficient models to save of fuel and running costs.  For example Hyundai sold 9,823 vehicles and Toyota registered figured 7,048 as of August.  Korean manufacturer Kia saw 5,978 vehicles sold in three months of the scheme, a 61% leap compared to previous years.  This included high sales of one of the cheapest vehicles available under the scheme, the Picanto and the ceed seeing an additional £1,450 “top-up” from Kia to boost sales.

US “Cash for Clunkers”

The US “cash for clunkers” scheme was the most generous to car buyers, with a incentive payment of up to $4,500 for certain new cars.  The uptake was massive and 700,000 vehicles were traded in and $2.877bn worth of applications had been submitted by the time the scheme ended on August 24th.  There are no plans to extend the scheme in the US.  Cash for clunkers has made a massive impact on car sales for the ailing US car manufacturers, with Ford, very close to bankruptcy, saw a 17% increase in sales in August compared to same period in 2008.

Conclusion

In total, the scrappage scheme has seen over £7bn invest around the world between the French, German, UK and US governments, resulting in over 4m new or nearly new car sales being sold and older vehicles being scrapped.  While the worldwide governments may have thrown a rope to a car industry on its knees, environmentalists argue that scrappage around the world had very little to do with its claims to reduce emissions.  Many have argued that most older vehicles have already polluted nearly as much as they will and producing new vehicles is much less environmentally friendly than simply keeping an old car running by servicing it regularly.  Some also argue that it takes four to six years to offset the CO2 emitted while manufacturing a new car. In addition, small, cheap cars aren’t the most fuel efficient compared to those with larger engines with a longer lifespan. 

Ultimately, however the schemes were pitched and sold to consumers and governments, the longer term benefits won’t be seen until the economy begins to recover and this may well occur sooner rather than later.

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  3. Scrappage scheme kicks off with 35,000 sales

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