German car sales on the scrap heap

THE withdrawal of the car scrappage incentive scheme in Germany appears to have caused a new car sales slump, with more trouble predicted as other European countries cut automotive life support.

Just as Fiat Group CEO Sergio Marchionne predicted, German new-car sales dived 29.8 per cent in February after the end of the green-tinged economic stimulus program.

JATO consultant head David Girolamo described the German result as a scrappage hangover.

“This is the true picture of consumer confidence in the German market, after a series of smaller monthly declines,” he said.

The German scrappage scheme wound up at the end of 2009, while a similar program operating in Britain is set to wind up in March. Spain, Italy and France are due phase out their schemes later this year.

Mr Girolamo said the withdrawal of the scrappage schemes could lead to large drop-off in sales across Europe.

“If this situation were to affect all markets at the end of their scrappage schemes, we could lose a third of all European new car registrations by mid-2010,” he said.

The German new car market was again outperformed in February by Italy, which is still offering scrappage incentive of between €1500 ($A2204) and €5000 ($A7347) for each car older than 10 years traded in for a new green vehicle.

German new car sales stood at 194,846 in February, down from 277,740 in the corresponding month of 2009.

Italy notched up 201,577 new-car sales in February, well up on the 167,341 it recorded in the same month last year.

The UK continued to perform strongly, thanks partly to its scrappage scheme, with 68,686 new cars sold in February, up from 54,359 in February 2009.

Spanish car sales were also up by 47.2 per cent in February, while in France, sales rose 18.7 per cent.

Mr Girolamo there was a marked contrast between western markets with scrappage schemes and central and eastern European countries without them.

“The overall picture is still far from positive,” he said.

“The declines appear to be less severe in central and eastern europe, which is more to do with the comparison period than any improving fortunes there. In February 2009, we were already seeing recessionary effects that continue today.

“The underlying figures from Western Europe are no more encouraging once you remove the impact of government incentives, as the evidence from Germany shows.”