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by Tim Beissmann

Two consecutive months of declining new vehicles sales data has led the Chinese Government to reintroduce a ‘cash for clunkers’ scheme in an attempt to give the market a boost.

The ‘early retirement’ program is designed to remove old vehicles from the roads and replace them with new ones, leading to reduced emissions, improved safety and a more active economy.

Owners of passenger vehicles, as well as old farm vehicles, buses and trucks, will get between 11,000 yuan and 18,000 yuan ($1600 and $2600) when they replace their old car with an new vehicle.

China initially introduced a cash for clunkers scheme during the global financial crisis and in 2009 it rose to become the world’s largest market for new vehicle sales. The program ended last year.

Year-to-date in 2011, 7.9 million vehicles have been sold in China, 4.06 percent more than over the same period last year. However, in April and May 2011, sales were 0.25 percent and 3.98 percent down on the same months in 2010, which was enough incentive for the government to reintroduce the program.

Secretary general of the China Passenger Car Association, Rao Da, said there were no guarantees the new scheme would stimulate the new vehicle market given the current strength of used car market.

“Car owners can make even more money in the second hand market. So unless they can’t sell the vehicles there, I doubt it will do much to boost sales,” Mr da told Associated Press.

Australian Prime Minister Julia Gillard announced the Cleaner Car Rebate scheme last July, which was planned to give people a $2000 rebate if they scrapped their pre-1995 vehicles for eligible fuel efficient passenger cars.

In January 2011, the program was canned, and Ms Gillard said the $429.7 million saved would be directed towards helping rebuild flood-affected regions of Australia.

So far this year, new vehicle sales are down 5.3 percent (or 22,362 vehicles) compared with 2010. Each of the past six months has resulted in lower sales than the corresponding month in the previous year.

So the question remains: do we need a cash for clunkers scheme in Australia to stimulate our new car industry? And was the Federal Government right to drop the system before it was introduced?

Let us know your thoughts in the comments section below.




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