The downside to the scrappage schemes that have been used by governments in Europe and the United States to bolster new car sales during the economic down turn, is slowly dawning on the automotive industry.
- shares

While the schemes, particularly in Europe, have driven vehicle sales up in a declining market, it is now obvious that many of these sales have been “pulled forward”.

In other words they are sales that would have been made in the coming year, but buyers, quite reasonably, have brought their purchase forward to take advantage of the cash incentives being offered by governments and car companies.

As a result one market research company is now suggesting that western Europe's new-car sales could fall by 11 per cent in 2010 compared with a two per cent decline this year, once the scrapping schemes run out.

Car sales next year could fall as low as 11.8 million units, a level last seen in the early 1990s, from a forecast 13.29 million units this year, says J.D. Power Automotive Forecasting.


The steep 2010 decline would be "payback" after sales have been artificially stimulated by government-backed schemes in major markets such as Germany, France and Italy, the UK-based forecaster said.

In those countries car buyers are being offered thousands of euros in cash bonuses to trade in old cars, which must then be scrapped, for new models.

"Next year there will be a greater contraction in sales because there will still be a weak economy, but the incentives that have artificially fed the market will largely be gone," Jonathon Poskitt, manager of European sales forecasts at J.D. Power Automotive Forecasting, is reported as having told the Automotive News Europe website.

"France, Italy and Spain have a history of incentive renewals and a continuation of these schemes is certainly possible, but it will be the German market that will make a difference.


“We don't expect the German scrappage scheme to be renewed," Mr Poskitt said.

A 2500-euro scrappage bonus introduced in Germany in February has helped to boost German new-car sales by 26.6 per cent to 2.4 million units in the first seven months, compared with a year earlier.


The booming German market has helped limit the year-on-year decline in western Europe's car sales to 7.8 per cent, 8.2 million units, in the first seven months.