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Germany’s old car repurchase program

The Truth About Cars writes about a German program that pays drivers to get their old cars off the road:

The attack of the aging automobiles is caused by the Abwrackprämie, cash for clunkers, paid by the German government. Since January 14th, 2009, owners of cars nine years or older can collect €2.5K if they put the pile of rust out of its misery, and buy a new one.

In the beginning, the program was ridiculed. It’s not going to work, said many, owners of clunkers won’t buy new. The Green Party said it’s “a joke.” Quickly, the mood changed.

Polk Germany prognosticated that the program would result in seven percent more sales than in 2008, that’s 200K units. A few days later, a new study said 1.2m people would buy a new car because of the Abwrackprämie. Too good to be true, given that barely 3m new cars were sold in 2008, with gruesome losses in Q4 08 and an awful January.

This strikes me as a pretty good idea. For the most part, old cars get worse mileage, have worse emissions, and are less safe than new cars. It’s a simple idea but one that could be of huge benefit to the car industry, and have some environmental benefits as well. Sounds like stimulus to me.

5 Comments

  1. Hey, Rafe, can I interest you in a very fine Saab 9000? only — my god — fifteen years old now…

  2. If this isn’t temporary, it could backfire in the long term by encouraging people with 7-8 year old cars to wait for the 9 year mark before trading.

  3. I heard something, too, I think from some Apple-related article, that in Europe (or some EU country), car manufacturers were required to take back cars after their lifespan. As such, the use of recyclable materials got so good that only three percent of the car was not recyclable. More use of woods, metals and glass instead of plastic.

    Setting aside the immediate economic incentive at play here — which I think is very, very cool — I really hope we’re moving toward the sorts of things (computers, for instance) envisioned by William Gibson. Permanent cases with renewed and recycled innards. Where we have a nearly closed loop of material that we constant recover and recycle.

  4. The laws/regulations concerning the Abwrackprämie are still somewhat in flux over here. Currently it appears that the money that was planned to be spent on this will only be enough for 600.000 buyers, and since it is paid on a first come, first served basis, that also accounts for some of the anxiety and run on the car-dealerships. It’ll be interesting to see how things will continue.

    There are also rumors that this is getting abused by people that collect the abwackprämie and still sell & ship the car to either Africa or Easter Europe rather than demolishing it. Though whether it’s only a few bad apples or sizable numbers, I don’t know.

    From a buyer’s POV unfortunately it’s not so much of a bargain, because prices (even after calculating the Abwrackprämie) tend to be a bit higher than last year. Phrased differently: the difference in rebates between Q4 2008 and Q1 2009 are a bit higher than the Abwrackprämie – at least for mid-sized cars.

    But of course the bill still serves its goal well, which is to motivate buyers of new, more efficient and smaller cars, while “getting rid” of older cars. I admit I was also very surprised that the € 2.5K was enough to achieve this effect.

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