Summary
It seems that despite many factors in common resulting in the present economic downfall, US and Europe also share some realities and measures to try and save the automobile industry. The "cash for clunkers" in Europe is also in place but varies in results, benefits and also preferences across the various markets.
Analysis
The incentives in Europe for changing older cars (usually 8 years minimum of age) for new ones, as way to push forward car sales take into account several incentives.
The common one is the contribution given by governments in case of buying a new car - in short how much the government finances? Another version is the road tax that can also be reduced if you change an old automobile for a new one. In countries like Portugal where the automobile tax is among the highest in Europe the sate contribution divides the cars by the age: 8 years minimum, between 8 and 12 and above 12 years of age. As older the car is the more incentive it is to scrap it. The amounts can start at 1200 EUR up to 1500 EUR.
Curious enough is the fact that all these incentives seem to end in December 2010 which assumes that by 2010 the automotive industry will be fully recovered. Honestly it may take longer but lets see if these incentives will really make a difference. People in thousands lost their jobs across Europe - and still do today - will they afford a new car even with all the incentives?
However it is claimed in some newspapers, recently, that these measures did help a lot already: According to the published news, since October the new car sales in Europe went up 24% which meant 1.4 million new cars being sold. It also seems that this was the first car sales positive shift in 11 months where some main European economies and car makers stand out such as Germany, France and Italy.
Nonetheless Opel still is with an uncertain future, Volvo may be acquired by Chinese and what to expect between Porsche and VW? Also what about Toyota? It seems that Europe protects its industry by applying a 10% price increase in Japanese imports.
My opinion is that these measures can only be sustainable if the big picture improves: people recover or maintain their jobs. This is the long term solution.
This author consults with leading institutions through GLG
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
