With the scrappage incentives being phased out in Germany and the US, the industry has to reinvent itself amidst the crisis.
The fiesta lasted for half a year, and the champagne flowed like water. Car dealers didn't trust their eyes: the crowd snatched the vehicles as if tomorrow the production would end.
Now the coffers are empty; the internet counter to apply for the scrappage bonus is closed at least in Germany where the largest such bonus program was in place. In the USA, the 'cash for clunkers' program already had closed earlier. While France continues to celebrate its 'Prime a la casse' party and the UK meditates over the right way, it is time to strike a balance.
During the program, most car makers achieved extraordinary sales increases some of them even in the triple-digit percentage range. Fiat, for instance, boosted the number of units sold by 125 percent. With an increase of more than 270 percent, the Romanian OEM Dacia topped all competitors.
The scrappage bonus, a magnificent idea then?
Rather not. As after every good party the hangover comes afterwards. Yes, the bonus program helped OEMs to keep their staff over the worst phase of the financial crisis.
But for the automotive industry, the crisis is not over; it is just about to begin. The scrappage bonus did not generate additional demand; it only motivated buyers to bring forward what they would have done anyway sometime in the future. Since the overcapacities in the automotive industry persist, the overproduction will go on. It will be difficult to find buyers for the oodles of vehicles that will well out of the factories in the months to come. There is already word the industry is heading for fierce rebate battles. Rebate battles: An euphemism for the cut-throat competition we will witness. Well, no, the German market is not the center of the universe nor is the German industry. But the problems are similar elsewhere. The approach to intensify exports to compensate for declining local sales (an argument heard several times in this context) is ridiculous: The crisis has hit other societies and geographies equally bad.
So in the absence of further government aid, the industry has to overcome its hangover and find its own ways out of the crisis. Developing more fuel-efficient and environment-friendly cars could be an alternative. But this idea is not new either, and the industry in this context has already proved an impressing inertia.
BMW these days announced to invest one billion euros into its German manufacturing sites. The question is if (and how) this can strengthen the luxury car makers' competiveness. It would have been much better to invest in innovative mobility concepts. In the end, the only one to benefit is the manufacturing robot industry.