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Fresh challenge for Germany’s car dealers: too many customers

New car sales soared 21 percent in February as a government incentive program sparked buying.

By Jeffrey WhiteCorrespondent / March 27, 2009

GOING, GOING... A salesman at a Peugeot dealer in Munich, Germany, showed off a new model to a prospective buyer earlier this month.




Nicole Zimmermann spent the better part of a recent Saturday hunting in vain for a new car. She’s got her eye out for something small and peppy: A Volkswagen Polo, perhaps, or a Ford Ka.

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Philipp Prase, a Ford dealer in Berlin’s Templehof neighborhood, looks a little exasperated; he’s had to tell too many customers the same thing: He doesn’t even have a Ka sitting in the showroom.

“We won’t have any for four, five months,” he says.

“Really? That long?” Ms. Zimmermann replies. Other dealers bring similar news of months-long waits for many models, even domestic ones.

The economic crisis might have Detroit’s auto giants on the brink of going bust, and some American dealerships might face bankruptcy. But here in Germany, Europe’s 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’s 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 €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 €2,500 per person for the first 600,000 cars sold.

“I would never think of buying a new car without this offer,” Zimmermann says as she navigates her black 1997 VW Polo through traffic, the odometer registering comfortably above 100,000 miles. “It’s like a kick in the seat. It made me start thinking that maybe I could afford one instead of a used car.”

350,000 cars sold since January
Judging by Germans’ response to the government incentive so far, many are thinking like Zimmermann. Since the incentive debuted in January, they’ve 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’s lead.
Italy is offering each citizen €1,500 to buy a new car, and doubling that figure for those who buy hybrid models. France is offering €1,000. Britain is weighing a similar incentive.

In most cases, including Germany’s, 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.