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Europe accounted for 40%, or 2.1 million vehicles, of the incentive-driven sales, according to IHS Automotive Chief Economist Nigel Griffiths. China alone accounted for at least 1.5 million sales driven by incentives or subsidies. Griffiths' comments were made today at IHS Automotive's Global Automotive Conference Europe in Frankfurt.
"The European scrappage schemes were particularly effective forms of economic stimulus at the deepest parts of the financial crisis of 2008-2009," Griffiths says. "So far we are seeing relatively small payback effects from the schemes and by staggering the phase-outs of the programmes, the industry has been given valuable time for a managed restructuring."
In addition to driving sales, the scrappage schemes have helped reduce harmful CO2 emissions by more than one million tons in 2009 alone and also raised the safety standards of vehicles on the roads by retiring older cars.
The European schemes were almost self-funding as the new cars were subject to sales tax. In 2009 the additional taxes from these sales helped governments recover 80% of the scrappage incentives. However, the schemes will result in lower government tax receipts during 2010 and 2011 as fewer cars will be bought because the incentives encouraged drivers to bring forward purchases to 2009.
“Unfortunately, this pay-back comes at a time when budget deficits are under intense scrutiny across the Eurozone as a result of the debt crisis,” Griffiths says.
This renders any further public incentive schemes unpalatable leaving auto sales exposed to the increasingly soft and risky economic environment going forward, Griffiths notes.
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