What scrappage incentives are doing to the European market

Scrappage incentive

By Glenn Brooks

Motor Industry

21 May 2009 10:15

Remember the old shape Skoda Octavia? We might not be able to buy it in Blighty but it’s roaring up the sales charts in Germany thanks to scrappage incentives on offer there. All across Europe, cash-for-clunkers schemes are turning markets upside down, with the brands that offer the most car for the money the biggest winners.

And believe it or not, Skoda outsold BMW in Europe for the first time in April 2009. So if the German experience is anything to go by, could the scheme that kicked off in the UK this week mean we’ll soon be seeing some unfamiliar names on our top 10 best-selling models list?

One market in particular shows just how much things have changed in Europe since 2008. Less than 12 months ago, it was being whispered that Russia would soon overtake Germany to become the regional number one new car market. But with the boom and subsequent collapse in the oil price, so too went the Russian economy. Last month, car sales there plunged by 60%. In Germany, by contrast, they rose by 19% in April 2009, having gained more than 40% in March 2009, the first month of a scrappage scheme.

Even the good news in the region’s largest new-car market hasn’t been enough to stop sales falling at a regional level, however. According to ACEA, the Brussels-based association that crunches such numbers, registrations in 30 European countries were down a combined 12.3% in April 2009. Look closely at the numbers, though and you see new car purchase patterns emerging.

Toyota is the best example of a manufacturer that gets the major things right – good cars and strong brand loyalty. Yet it’s in trouble because while rivals like Hyundai and Kia have cranked up the incentives and loaded their cars with standard equipment, Toyota Motor Europe (TME) has been refusing to do likewise. Consequently, it’s been one of the biggest losers in recent months. While rivals’ cash-back offers might work in the short term, Toyota is canny enough to know that heavy discounting hammers resale values and destroys repeat business.

While TME tries to get to grips with the unfamiliar double whammy of huge falls in sales and profits, the list of those rivals doing well in this economic downturn includes some surprising names. According to ACEA, Audi sold more cars last month than Toyota, overtaking BMW and Mercedes-Benz in the process. So what’s its secret? In short, fresh products and the perception, at least, of strong value for money.

By Glenn Brooks