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Government Subsidy to Boost German Car Sales
Mar 16, 2009

Subsidy offered by the German government is expected to boost the sales of new cars in 2009, providing a ray of hope for the beleaguered automobile industry.

The German Car Industry Association (VDA) has claimed that Berlin’s offer of a trade-in fee for new car buyers may boost the car sales in 2009, as reported by m&c.

In December 2008, VDA forecasted that the registrations of new passenger cars in Germany would decline to around 2.9 Million in 2009 from nearly 3.1 Million in 2008. Car dealers throughout the country have been using the subsidy of 2,500 euros ($3,200) offered by the government to market their vehicles. According to VDA, the plan may serve as a bridge to a probable pick-up in the German auto sector in coming years.

The driving factor for the anticipated growth in the German car sales is the subsidies offered by the newly formed government to consumers, prompting them to purchase new cars.

Thanks to low inflation that boosted consumers’ purchasing power and the government’s stimulus package, German consumers’ confidence rose dramatically for the sixth month. Moreover, the stimulus package has raised hopes of improvement in current economic conditions that will further boost car sales in the country. Moreover, subsidies to scrap old vehicles have proved beneficial for the industry as approximately one out of five jobs in the country directly or indirectly depends on automobile industry.

Consumer’s who are scrapping their nine years old vehicle to purchase fuel-efficient vehicles will receive a bonus for registering new vehicles by the end of the current year.

However, the individual national markets across Europe are showing grim picture, with Latvia and Ireland observing more than 80% decline in the registrations of light commercial vehicles in January 2009.

According to a Research Analyst at RNCOS, “The government’s bonus payment plan has proved insufficient to rescue the German auto industry. As a result, carmakers witnessed the worst year in sales since the Second World War. However, demand for new cars has been rising significantly since mid-January 2009. These are initial indications to the stabilization of Germany’s auto industry though the task seems very difficult.”

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