Auto scrapping bonus ends

Germany's car scrapping premium expired yesterday after two million buyers took advantage of a landmark government offer which has boosted the crisis-hit auto sector.

The website of the Federal Office of Economics and Export Control, a unit of the economy ministry, showed that the last contract had been taken early in the day, after demand surged to around 14,000 per day as the programme entered the final stretch.

But although the plan has succeeded in keeping domestic auto sales afloat amid the country's worst recession for six decades, 2010 sales could slump heavily because many drivers brought forward purchases to benefit from the subsidy.

The grant of €2,500 for drivers who scrap old cars and buy new ones has especially spurred sales of small cars in Germany, with foreign brands among the main beneficiaries.

Starting in February, the premium was provided with a total budget of five billion euros, the equivalent of two million bonuses.

Officials have ruled out an extension of the plan, which was prolonged once owing to the strong demand.

Figures for August car sales were due later yesterday, but data for July showed that German auto dealers had sold 2.4 million cars since the beginning of the year, or 27 per cent more than in the first seven months of 2008.

Over the same period, exports of German cars declined by 31 per cent, though similar "cash-for-clunker" schemes in other countries stemmed the drop to a certain extent.

Auto sales in China, France, Japan and the US have also rebounded owing to government subsidies, with Japan and the US reporting in August their first 12-month increases in more than a year.

While many in Germany hailed the plan, the most visible element of a vast government economic stimulus package which includes a €17.5-billion credit stimulus announced on Tuesday, some warn that the bonus had unintended side effects.

Retailers and some economists have said other major purchases have been postponed as consumers rushed to buy new cars, and the programme has also affected the country's used car market and car repair shops.