Fresh challenge for Germany鈥檚 car dealers: too many customers
| Berlin
Nicole Zimmermann spent the better part of a recent Saturday hunting in vain for a new car. She鈥檚 got her eye out for something small and peppy: A Volkswagen Polo, perhaps, or a Ford Ka.
Philipp Prase, a Ford dealer in Berlin鈥檚 Templehof neighborhood, looks a little exasperated; he鈥檚 had to tell too many customers the same thing: He doesn鈥檛 even have a Ka sitting in the showroom.
鈥淲e won鈥檛 have any for four, five months,鈥� he says.
鈥淩eally? That long?鈥� Ms. Zimmermann replies. Other dealers bring similar news of months-long waits for many models, even domestic ones.
The economic crisis might have Detroit鈥檚 auto giants on the brink of going bust, and some American dealerships might face bankruptcy. But here in Germany, Europe鈥檚 largest car market, something like a boom is under way and dealers are having a hard time keeping their lots full.
In February, the same month that saw Detroit鈥檚 Big Three post sales declines of nearly 50 percent, new car sales here shot up 21 percent, and could go higher this month. The reason: An incentive program from the German government that is putting 鈧�1.5 billion ($2 billion) into the pockets of consumers if they turn in their old junkers and buy a new, more environmentally friendly car.
That amounts to 鈧�2,500 per person for the first 600,000 cars sold.
鈥淚 would never think of buying a new car without this offer,鈥� Zimmermann says as she navigates her black 1997 VW Polo through traffic, the odometer registering comfortably above 100,000 miles. 鈥淚t鈥檚 like a kick in the seat. It made me start thinking that maybe I could afford one instead of a used car.鈥�
350,000 cars sold since January
Judging by Germans鈥� response to the government incentive so far, many are thinking like Zimmermann. Since the incentive debuted in January, they鈥檝e bought 350,000 new cars under the program. Domestic manufacturers are reporting a 60 percent increase in orders.
With automotive sectors hurting worldwide, other European countries are following Germany鈥檚 lead.
Italy is offering each citizen 鈧�1,500 to buy a new car, and doubling that figure for those who buy hybrid models. France is offering 鈧�1,000. Britain is weighing a similar incentive.
In most cases, including Germany鈥檚, the incentive programs require customers to turn in a car that is at least nine years old to qualify for the money.
Contrast to the US bailout approach
Such customer-driven bailouts stand in contrast to the approach taken in the United States, which has considered direct loans to automakers rather than substantial customer incentives to give people a reason to go car shopping again.
In Europe, countries are still debating whether to rescue individual automakers that are struggling. Germany has balked at rescuing GM鈥檚 Opel brand, which employs 26,000 people here and is near collapse. VW is still operating under scaled-back production and shorter work weeks. Sweden recently decided against saving its iconic Saab brand, also a subsidiary of GM.
Europe鈥檚 auto industry started the year with a 30 percent decrease in new-car registrations compared with the year before, according to the European Automobile Manufacturers Association. So programs to grow consumer demand might offer at least a glimmer of hope following more than a year of dismal sales and production stoppages across the Continent.
IHS Global Insight, an economic analysis firm, predicted last month that incentive programs could lead to 500,000 more new-car sales this year. But given the extent to which Germany鈥檚 program has taken off, some experts are revising those estimates upwards.
In Germany, where 1 in 5 people work in the automotive industry, customers are not the only ones happy with the program.
Salesmen now see their showrooms humming during the peak hours. At the Ford dealership where Mr. Prase works, it feels like a Memorial Day sales event in good times: there are the sounds of printers and pecking on large calculators, rubber soles squeak on the polished floor, a coffee machine chortles in the corner.
The dealership is already sold out of last year鈥檚 models and showroom cars. 鈥淲e thought we had enough [in stock] for the whole year,鈥� he says. 鈥淏ack in December, we would never have imagined anything like this.鈥�
鈥淭he incentive shows that there is money out there, because people are buying new cars, even people who say they don鈥檛 have money,鈥� says Lothar Dalter, a Volkswagen salesman.
Mr. Dalter makes his pitch to Zimmermann, who eyes a new black Polo in a cold back lot.
This car, he tells her, might not be here the next day. And in a move mirrored by other carmakers, he says VW is giving its own cash bonus 鈥� 陇1,000 in this case 鈥� to sweeten the deal.
Programs like Germany鈥檚 have their detractors among auto industry experts and economists like Jan Hagen at the European School for Management and Technology in Berlin. Mr. Hagen says incentives do little to address a bigger issue facing European automakers: they are still producing too many cars.
Germany alone produces nearly 6 million a year in normal times.
鈥淭his is not really creating new demand, it鈥檚 just shifting current problems to the future,鈥� Hagen says.
Others lament that there is nothing in the programs that requires people to buy domestic cars. Germany鈥檚 program is seen to be as much of a boon for foreign carmakers as German ones.
Still, Germany鈥檚 government, bowing to public pressure, announced this week that it is extending the incentive beyond the initial 600,000 car cap, which dealers say could be reached by next month.
That鈥檚 good news for car shoppers like Zimmermann who are being told by dealers to place their orders to guarantee the government bonus.
She now has more time to weigh the merits of one model over another. On an Opel lot, she spies a light green Corsa.
鈥淭hat鈥檚 a very nice car,鈥� she says. 鈥淎nd cheaper than a Ford.鈥�
