EZA 891 Report:

21 April 2009

Germany: Car scrapping scheme – short-lived economic stimulus

• On 06 Apr the German government was pushed, by soaring demand, to increase the total volume of the car scrapping incentive scheme to €5bn.
• Both the number of filings for the scheme – 1.2 million to date, ie 3% of the whole stock of German cars – and soaring new car registrations in Germany relative to the rest of Europe, highlight the effect of the scheme.
• Together with a €1.5bn tax incentive for new car purchases and top ups by car manufacturers, the car scrapping incentive seems to have the biggest multiplier effect within the fiscal stimulus packages (EZA869, EZA877)
• The boost to current demand for low- to mid-priced vehicles is likely to reduce demand for new cars from next year on, while keeping used cars in short of supply.
   

Asset conclusions: car scrapping scheme supports recovery this year, but effects on car manufacturers’ profits widely discounted in share prices.
 

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