Quality Magazine

Automotive Group Says Government Incentives Drove 1 in 12 Cars Sold in 2009

June 17, 2010

FRANKFURT, GERMANY - Government incentive programs launched at the height of the financial crisis were responsible for one in 12 car sales globally in 2009, or approximately five million vehicles sold in 20 countries, according to IHS Automotive, formerly CSM Worldwide and IHS Global Insight's automotive group.

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.

IHS Automotive brings together the powerful analytic and research capacity of CSM Worldwide and IHS Global Insight's automotive group. IHS Automotive is dedicated to providing superior-quality information, analysis, forecasts, and advisory services to organizations involved with the automotive industry. They provide understanding of the market forces and trends through reliable, timely, and accurate intelligence and assessments. IHS Automotive has analysts in 13 cities in 10 countries across three continents.

IHS provides information and insight in pivotal areas that shape today’s business landscape: energy, economics, geopolitical risk, sustainability and supply chain management. Businesses and governments around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. Headquartered in Englewood, CO, IHS employs more than 4,200 people in more than 30 countries around the world.