[Marxism] The German Auto Bubble-WSJ

Lüko Willms lueko.willms at t-online.de
Wed Sep 2 23:57:36 MDT 2009

johnaimani (johnaimani at earthlink.net) wrote on 2009-09-02 at 13:29:51 in  
about [Marxism] The German Auto Bubble-WSJ:

> AUGUST 31, 2009
> Germans Debate Whether Car Trade-In Plan Will Backfire 

> The car scrappage program, which subsidizes new car purchases on old 
trade-ins, was a model for similar plans adopted elsewhere, including the U.S. 

  Actually, the model is France, where such programs were already 
implemented in the 1990ies, and the scrappage prime was increased from 300 
Euro to 1000 Euro in late 2008. 

> "The German car market is good for roughly 3 million to 3.3 million cars a 
year. This year, we will probably sell 3.7 million, and our forecasts are for 
2.7-2.8 million next year," said Ralf Landmann, a partner with Roland Berger.
> Carsten Dreger, an economist with the DIW research institute in Berlin, 
contends that not only was the cash-for-clunkers plan increasing 2009 
demand at the cost of 2010's, it is also cannibalizing potential demand for 
other consumer goods this year.

  The average age of the registered cars in Germany increased steadily from 
6.2 years in 1988 (I don't find older numbers) to 8.2 at the end of 2008. 
There are a little more than 1 car per 2 inhabitants. The market is saturated: 
very few new buyers. The sales are mostly replacement of old cars. The 
scrappage scheme has given this replacement process a boost this year, 
strongly rejuvenating the car population in Germany. 

  Of course, the replacement process will rather slow down after that, in 
absolute numbers, and the average age of the car fleet will grow again. 

> Germany's car makers have already laid off most of the 100,000 temporary 
workers they employed a year ago, according to a spokesman for the Federal 
Association for Temporary Work in Berlin. 

   To clarify: they reduced the temporary (rented) workers in the last year. 

   The car factories in Germany were hardly affected by the scrappage 
scheme, since mainly small and cheap cars were bought; those people who 
are rich enough to drive a big Mercedes, BMW, or Porsche, don't keep their 
cars for so lang that they could qualify for the scrappage scheme (minimum 
age of the scrapped car was 9 years) and for them the scrappage prime of 
2'500 Euro would be lower than the sales value of the old car and too low for 
an incentive to buy a new one. 

   The car factories in Germany were not very much affected by the 
scrappage scheme, since the cheaper models which sales were boosted by 
the scrappage scheme are mostly built in other countries. 

   Negatively affected by the scrappage scheme are the independent 
workshops who live from the repairs of old cars. and the scrappage industry 
which had to rent additional storage space, was faced with heavily dropped 
prices for scrapped metal, and is forseeing a lower demand for used 
replacement car parts. Many of them were also hurt by having to destroy 
cars which were still in good shape and in many cases worth for a higher 
price on the used car market than the 2500 Euro scrappage prime. The 
export of such still usable cars to Africa, Eastern Europe and Asia was also 
heavily affected, since the law required the car to be really destroyed. 

Comradely yours, 
Lüko Willms
Frankfurt, Germany

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