Industry wins with a scrap
GOVERNMENT incentives saved Europe’s new car sales from oblivion last year, but forecasters warn of uncertain times ahead.
In Australia, government incentives limited the crash in new car sales from an expected 25 per cent to 7.4 per cent last year, but in Europe they kept sales to just 0.7 per cent down on 2008.
While our incentives were a tax break for business, the European governments offered a variety of scrappage programs which gave cash bonuses to buyers to get rid of old cars.
But industry analysts JATO Dynamics warns of tough times for the car industry when scrappage systems end.
It says sales in Germany shrunk 4.6 per cent in December after it closed its scrappage incentive scheme which hade contributed to a 23.9 per cent annual rise.
This compares with a 72.9 per cent drop in Latvia which did not have a scrappage scheme.
The Australian auto industry last year called on the Government to use a scrappage system that includes recently used cars.
However, Federal Chamber of Automotive Industries boss Andrew McKellar this week said the government’s business incentive had been effective and there was no need for another scheme to take its place after it expired at the end of last month.
It is estimated that 80,000 vehicle sales were the result of the Government’s stimulus package.
‘‘The tax break wasn’t targeted at the car industry but at smaller general business across the board, nonetheless that did have benefits for the car industry indirectly,’’ McKellar said.
‘‘The tax break has been effective, but realistically we are not in a position now where the government is likely to contemplate new and additional measures.
‘‘The scrappage system worked well for Europe but it has to recognised that it is an expensive police measure that may be not sustainable.
‘‘In Australia we have a more sustainable economic profile, riding out the worst of the downturn in demand.
‘‘Hopefully we are now in a position where private buyers are coming back into the market and we can consolidate, provided economic recovery continues to give momentum.
‘‘The key thing now is that there is a balanced and proportionate response in monetary policy and no interest rate rises too rapidly which could shake off the early recovery.’’
Analysts believe European scrappage schemes assisted sales of small cars more than bigger more expensive vehicles.