Car Crunch
February 4, 2009
On the whole, the figures issued by the Association of German Automakers (VDA) on Tuesday, February 3, made for gloomy reading.
Domestic car sales fell by 13 percent compared with the previous year, down to a total of 189,400 vehicles.
The market abroad was dramatically worse. Exports plummeted by 39 percent, with only 314,000 German-made cars being sold around the world.
In addition, production declined by 34 percentage to a total of 314,000 vehicles.
With consumers reluctant to spend in uncertain economic times, many German carmakers temporarily shut down assembly lines late in 2008.
Since the global economy has shown little promise of turning around, Germany's automobile companies have every reason to believe 2009 will be a tough year. But it turns out there is also cause for optimism.
Premium having effect
While overall January numbers were down, orders for new cars rose by 16 percent in the final week of the month -- the first time since September that there's been any sort of rise.
"These are initial encouraging signs," VDA President Matthias Wissmann said in a statement on Tuesday. "They give cause for hope that the domestic market, while remaining difficult, is stabilizing."
The main cause for the increased demand has been the new premium of 2500 euros ($3240) the German government is offering to drivers who scrap environmentally unfriendly cars more than nine years old and buy new ones.
Some 3000 Germans have applied for the premiums, which the government should begin paying out in March. Berlin has set aside some 1.5 billion euros to finance the initiative.
Rebates from the car manufacturers themselves provided further incentive to consumers, and Wissmann said he expected "further marketing measures" to interest potential buyers.
The biggest gainers were sub-compact models such the Smart and the Fiat 500. French carmaker Citroen also announced that it was stepping up production to meet increased demand.
But sales of medium-sized cars remained stagnant, and purchases of luxury cars such as the Mercedes E-Class and the BMW 5 series dropped by nearly 50 percent.
So while there is some good news for Germany's auto industry, German carmakers who have concentrated on larger, more expensive models are probably going to have to reorient themselves in order to weather the storm.