Report Shows Real Cost of Scrappage Schemes

With our own scrappage scheme now underway, it is perhaps timely to look at the experiences of our European neighbours. It is estimated that some 3.6 million new cars will be sold in Germany this year, around 800,000 more that would have been the case without the country’s 2,500 euro scrapping incentive, which owners of vehicles more than nine years old are eligible to take advantage of. However a report from the German website ‘Kfz-Betrieb Online’, based on a study conducted by automotive industry business intelligence provider Eurotax-Schwacke indicates that government incentives to scrap old cars are no silver bullet. “The premium doesn’t rescue the [automotive] sector, it only defers the problem,” stated Eurotax Schwacke managing director Michael Bergmann.

According to Bergmann, the German state will this year ultimately pay out for 1.4 million new car premiums. However he says that only 460,000 of these are actually additional purchases – the remainder can be accounted for by purchasers who would have bought a new car anyway and are simply utilising the scheme to save money. This means that every genuine extra new car sold can be calculated to actually cost the German taxpayer 7,600 euros. And next year the automotive industry will suffer because of the scrappage scheme, Bergmann adds, as the fundamental problem over overcapacity within the industry has not been addressed.