VW plant closure prevented by scrappage incentive
March 17, 2009 by Matt Brogan
It’s quite amazing to think that the demand for a vehicle in one country, brought about by a tax incentive, can have such a specific and crucial impact on the lives and jobs of employees in a car factory half a world away.
But with Germany’s scrappage incentive driving sales of the Volkswagen Polo through the roof, the brand’s South African plant has now managed to avoid the temporary closure it was certain to face next month in order to keep up with the unprecedented demand.
Volkswagen’s Uitenhage factory in South Africa was supposed to have stopped production in the weeks before and after Easter, but plans changed when VW’s order books in Germany started to fill. The plant will now produce 6,000 additional Polos to meet with demand – most of which are to be exported to Germany.
The scrappage incentive provides German customers the equivalent of $4,905 AUD if they trade in a car that is at least nine years old for a new, more fuel-efficient model. The scheme has seen new car sales in Germany rise by 21.5 percent in February.
The price for a basic three-door Polo in Germny would be the equivalent of $23,840 AUD.
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sounds like a good idea and it’s clearly having the desired effect. I’m assuming this is like the minimum trade-in deals that we see here from time to time, or is the scrappage incentive paid on top of the trade-in amount? Couldn’t imagine that would be the case, would it?
It’s been reported that Toyota Aus are lobying the Govt to indroduce such a scheme here.
It is a unique and productive way to ensure support for the their motor industry. Note they have not supported direct handouts for the foreign owned subsidiary; Opal.
Its an unique and productive way to ensure support, right up until the point in a few years time when everyone with a decade old banger has replaced it, and there is a big lull in the normally steady demand created by the car retirement cycle. This scheme, unless it becomes permanent (unlikely as its quite expensive for recession ravaged governments) is simply taking tomorrows car sales and making them todays. It does nothing to address the real issue of massive oversupply in the automotive industry.
Taking tomorrow’s car sales and making them today’s.
Yeah, that’s really, really bad. Now why would anyone not think that’s a flawed idea.
I guess it’s a shame those Polos aren’t made in Germany.
VW Germany gets lots more Polo sales, but the VW workers in Germany don’t get any further job security.
Maybe a 2 tier Scrapage System here….
$4000 for Imported Cars
$6000 for Aussie Made Cars
That would still help Toyota Oz, & maybe even get them to consider building corolla here again, & perhaps drop Aurion.
Jus a thought…
We really need this in Australia. We have a first home owners grant, why not do the same for first time new car buyers. A grant of say $2,000.00 that could be used as deposit on finance.
I think a better plan is to start being more thorough with vehicle inspections on a yearly basis. It will encourage a longer term purchasing of cars (new and secondhand) and also give the whole car parts/service industry a lift.
A two pronged approach will have further reaching effects than encouraging only new car purchasing. Also more money will stay in Australia.
Coming from WA, we sorely need yearly vehicle inspections. People just don’t care.
Supercujo,
Don’t they already have yearly inspections in NSW as well?
Does that have the end result of driving more sales of new cars, or just dodgy Roadworthys?
Perhaps new cars would’t need to be inspected for the first 2 or 3 years.
Salesman, don’t we already have $2000 Min Trade to use a finance deposit?
Ah, reminds me of the good old F & I days……
I think the German system promotes sales of new small fuel efficient cars, rather than just any new car.
All good suggestions guys, but I reckon that The Salesman is in a good position.
If people are going to still buy new cars, they will lean towards better value for money, from manufacturers that are now releasing better built & featured vehicles.
Keeeeya! (KIA)
All that will happen is that the dealers will give u less for your trade than they were going to.
Will depress used car market even further and just bring forward sales.
Where is all this money going to come from and who is going to repay it?
Realistically, Government subsidising an Industry that should have squirreled away a few chestnuts when times were good.
Ive never really been a fan of this idea.
As earlier said it would only bring tomorrows sales forward to today.
Also, it would make used cars worth even less, yes even less than the nothing they are now worth thanks to the new car boom over the last few years.
And in the end it probably wont save the consumer much. Wait for the inflated prices that this would cause just like the home owner grants and water tank rebates did on their respectuive markets
Great idea gets a lot of 10 year plus polluters off the road , will boost sub $20,000 sales , salesman will certainly be creaming the bonuses .
Friend bought a $9000 second hand car for daughter , no trade in , cause the bomb was $500 trade in, sold bomb $1500 ,privately still on the road .
With scrappage would have bought $15000 plus car less $5000 still only outlaying $10,000 , good bit is bomb goes to dump , we all win .
Bring it on mr rudd
Yes “we all win” in this yet another short sighted episode
On one hand, good idea. On another hand, this only benefits the poor people really. Where’s that money gonna come from? Taxpayers. I’d prefer if the government spent that money on the health system etc. Another thing they can do is scrap all the on road costs on new cars, and LCT. That would have saved me around 10K+ on my car.
This will only be feasible in the short term. If this was to go for a few years, you’ll find the cars you buy, will depreciate stupidly quick! Since you’d be better off snapping up a bomb for 500 bucks and swapping it for a 5K handout, and a new car, rather than just buying one second hand. If 20K car costs you 15K, it will be worth 10K next year. That’s massive drop from its original price.
Oh and Holstein,
what new car do you get for 15K if thats what she might have spent???
this would only apply to new cars not 2nd hand.
I doubt the extra 4 big ones would stretch her budget from 9K to low 20’s
Dan,
i agree, but i further question whether the “poor people” who can only afford to drive a $500 in the first place will really find shelling out low 20K for a new car suddenly easier thanks to an extra 3.5K????????
Andrew M said – “what new car do you get for 15K”
I’m sure you’ll find something Korean or Malaysian in that price range…
I know Andrew. That’s another issue. Which is why I gave that scenario of an easy rort. You wanna get yourself a Merc? Go get a Datsun bomb first for 200 bucks out of the paper. Trade that to the government for your 5K handout, and get yourself the Merc. You’re saving 4,800 bucks on the deal, thanks to the government.
Thinking about it further and further, dumb idea!
Man some of you gooses will winge about anything .
1 ] you must have owned the old car for more than 12 months
2 ] gee salesman dont you sell kia’s for $15000 new
3 ] so their going to devalue any way, particulaly if its a big 6 or v8.
4 ] germans are pretty smart manufactures and marketeers , they have done their homework , italians and french are also considering it
5 ] better than dumping $6 billion on a whim/fantasy with so called expert local manufacturers .
give it a go
I think its a good idea. What you said JasonP, less if you are buying a foreign car more for an Aussie car. If an equivalent Aussie car cannot be found maybe offer alittle more in scrappage fee.
Dan,
Sure a Kia rio is 15K, but dont forget to add the extra $2700 to get it on the road.
and then dont forget to add the extra premium for wanting an actual car which would see you needing more like 20K
Holstein,
what did your friend buy for 9K??? (i know it was second hand)
Yep, I know. And as someone said previously, the scrappage incentive should only be directed at aussie made cars, ie. commodores, falcons, camrys and whatever else is made on our shores. Giving that money towards people buying Kias, Volkswagens, or Nissans, is bloody stupid. As the governemnt would be propping up jobs overseas rather than local jobs, with our taxpayers money. Besides, as if someone with a 500 dollar junk is going to go and buy a new commodore all of a sudden. It works in germany, as their home companies produce cars affordable enough to be sold to poorer people who drive 500 cars. Here in Australia, you’d need to fork out around 30K minimum for a locally made car. It’s just not realistic for us.
Dan It was Andrew M who first mmentioned the idea of giving people a $15k incentive to scrap their old cars provided that they buy an Aussie built car and i support him on that.
It would be even more of an incentive if the Federal Govt stopped trying to establish a “level playing field” with our trading partners and continue to reduce Tarrifs.
The government says its all aprt of the “fair trade agreements” that they have signed yet no-one else has dropped their tarrifs.. just us.
Shows the Federal Government is more concerned with our international image than anything else really doesn’t it?
Not that our trading partners seem to mind because it means that if they have problems selling a particular car they can dump the excess stock in Australia.
ATM our tarrifs are at 10% and going to be dropped to 5% thanks to the recommendations in a half ars-d report by Steven Bracks.. which will mean at least a 20% difference between us and our nearest trading partner.
15K is a bit too much I think. Keep it 5K, or perhaps just get rid of the stamp duty crap when you buy a car. The extra 10K per car can be used elsewhere. Next they’ll be giving away free taxpayer funded cars…
Level playing field hey? Cost of beemers etc. will come down. Falcodores will feel more heat and pressure to improve their game. So far they’ve had it easy. I guess this can only benefit the consumer. Not so much for Falcodore & Co shareholders haha
Wheelnut, i dont believe i ever suggested a “$15K” incentive for aussie cars, but i did say any incentives should only apply to aussie made vehicles whether it be tax cuts or scrappage schemes.
And i have also said what Dan just reiterated in that i cant see someone driving an old bomb suddenly going out and buying a new commie just because their pocket would be 3.5K heavier
Dan,
with the introduction of the focus and Cruze to be made here it would see aussie made cars for the low 20K mark.
even then i still cant see it as something to lure everyone out of their 500buck rust buckets.
they are still gonna have to shell out 20K for something that they have never prioratised in their life evidented by their current bomb of a ride
Dan,
I agree that lowering the taxes has made the market more competitive and better for the consumer, but in these times i feel its a matter of everyman for himself.
Why should we sacrafice our selves to ensure the continual injection of cash into a foreign economy???
We are absolutely spoilt for choice in OZ, Too much choice.
I bet you wont get the sort of choice we have in Japan….
As wheelnut said its like our government cares more about our international image than what is happening below the skin, and I have also thought that for a long time.