Scrappage bonus 3.0. Subsidies for the auto industry?

They are meeting in Berlin again this week. It's about subsidies for the auto industry, about fueling consumption. Citizens should feel like buying a new car, but this time it is not that simple. Because many parameters have changed, and what was successful as scrappage bonus 1.0 and 2.0 could no longer stand out.

New car production at Volvo
New car production at Volvo

The car. It has been in the pillory for years. Is dirty, impossible and at most tolerated as an electric car for private transport! What type of drive should you promote with a scrappage bonus 3.0 without losing credibility? The problems begin here.

As a mobile chemical laboratory, the diesel has become clean. The majority sure, with a manufacturer, the fuse of the doubt is glowing again. On long journeys a sensible type of drive, which you definitely cannot subsidize after talking about it for years.

Maybe plug-in hybrids? They are mobile surprise packages. In theory, they could stream through the city centers. Pollutant-free with green electricity in the cells. The big unknown in this calculation is the driver. Does he run on electricity or fossil energy? The decision is up to him, and one can assume that the majority of the plug-in hybrids are operated purely fossil due to habit and convenience.

That leaves the purely electric car. Battery operated, whereby I deliberately leave out any doubts about the extraction of raw materials. In principle a good thing, especially for the metropolitan regions. It is particularly welcome when the electric car is powered by electricity from renewable energy. A candidate for even more massive funding than before?

The thing has two huge hooks

Electric cars are expensive. Not for the well-off family. She buys the subsidized Stromer as a green fig leaf. The Panamera and the Diesel Audi are still in the garage for the weekend tour for après-ski. No problem! Things get a bit more difficult for people with slightly less money. So a normal income. Without a second or third car and without a carport with a power connection. The majority of the lantern parkers, the tenants.

It will be tight for them when it comes to electric cars. You are likely to be the one who will suffer the highest percentage of income disadvantage as a result of the crisis. Are they ready for a car category that is expensive and has disadvantages? Around € 30.000 for a small electric car - are they in the family's budget? Are they the target group that is planning longer journeys as a charging station slalom and waits with humility until the range is right, while the youngsters grumble in the background and the coffee is already getting cold with Grandma?

The auto industry will brake

Even more funding for electric mobility is not really welcome. There are Tesla who like to sell their electric drives. You only have that in your portfolio. But it looks different with the established ones. The corporations will do everything in their power to land an electric car in 2020. Please not too much of it, under no circumstances exceed the CO2 targets!

That would be unpleasant for the future, because you would be forced to save even more CO2 in the following years than you already have to. Small dose electric cars, a little more every year, that's welcome. Nothing else. So what will happen? Subsidies for the sale of new cars? The warehouses are full of new vehicles, used vehicles a few months old, annual vehicles and returns from leasing contracts. The inventory is depressing dealers and manufacturers, and it is difficult to find a solution that does justice to the situation. Maybe even impossible.

It may even be that economic and social reality will lead the discussion to absurdity.

Scrappage bonus 3.0. Trends against it.

There are young trends. And they're not good for the auto industry and fueled consumption. Large company car fleets are immobile in the crisis. Companies are reacting, digitization is sweeping across the country with dynamism. What has been warned for years suddenly goes. Sales representatives stay at home, sales are organized via the network. Conferences and meetings are canceled, scary for hotel operators and restaurants. Pleasing for the providers of video conference systems, whose market with Corona has literally exploded.

Working from home is becoming the norm, and the longer the crisis lasts, the more all these young trends will solidify. Fewer cars are needed in the medium term, companies are already reducing their fleets and are not ordering a replacement after the end of the leasing period. Instead of the company car in front of the door, employers have the option of more salary as compensation.

An interesting trend that is good for the environment. That very quietly brings what politicians have been demanding for years. Troubling for corporations. Especially if controllers have recognized the savings potential through digitization and will consequently exploit them further. 2,36 out of 3,6 million new vehicles were new to commercial customers in the Federal Republic in 2019 authorized. The crisis could fundamentally change these numbers in the future. Car production is already expected to decline by 20% in the current year.

Do subsidies still make sense for the automotive industry?

In the current situation, do people want new cars, the purchase of which they usually have to finance through loans? The scrappage bonus 3.0 - there are doubts. Maybe the crisis is turning things around. The auto industry included. If home office and video conferencing establish themselves, it will not be the end of the automaker. Mobility is always required. Only the products would have to be different then. Inspired, innovative, sustainable.

Does a scrapping premium 3.0 make sense?

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Images: Volvo Cars (1)

10 thoughts too "Scrappage bonus 3.0. Subsidies for the auto industry?"

  • Probably only the car companies will survive that offer a broad portfolio in terms of engines such as Toyota or Hyundai.
    In addition to conventional combustion engines, both groups also offer practical hybrid and fuel cell vehicles, which is why the German manufacturers are apparently in deep sleep.

    It is cheeky that the German manufacturers are again asking for a scrappage bonus for the corona crisis, but at the same time want to pay their shareholders a dividend.

    In the future, German car manufacturers will have to be careful not to lose the technological connection, in principle, in my opinion, one should be open to all environmentally friendly engine technologies.

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  • The locusts & the bonus

    In Africa, pesticides are sprayed over the rural population to save them and their crops from the grasshoppers. Tax money is distributed over Germany in the hope that the bottom line would also have a positive effect.

    Both measures are strikingly similar.

    In Africa, the rural population suffers from poisoning more than the grasshoppers addressed. In D, the scrappage bonus 3.0 will only benefit people who know workshops, saddlers, locksmiths, welders, painters and the like only from fairy tale books.

    Second, car dealership owners will benefit. But they do not necessarily trade German brands and even fewer cars that would actually have been produced in Germany.
    In addition, even the dealers have already complained of negative effects with the first two scrapping premiums. It was said that a decline in sales and profits from their own workshops followed and destroyed jobs, which is immediately obvious.

    Ultimately, a lot of German tax money flutters relatively freely around the globe and ultimately ends up as food for grasshoppers of any nationality.

    A state budget can hardly be dealt with much more stupidly and untargeted than exactly as it is.

    Chapeau for this brilliant achievement 3.0…

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  • Hello
    Very good post, thanks Tom.
    I am also against the scrappage bonus.
    1. Well-preserved cars that would and could continue to drive for a few years are disappearing again. Some Saab too
    2. Slump in sales, especially in independent workshops
    3. Slump in new car sales after the scrappage bonus
    This was shown to us by the two previous scrapping premiums ... On average, the entire market suffers from a scrapping premium 2 years ago ...
    Greeting André

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  • Scrappage bonus? Will not pull. I work in the home office, I am not allowed to go to friends. Restaurant visit is also not possible. Summer vacation 2020? You can safely forget. So what is a car for when it just stands and you are not allowed to use it? When it comes, it will be a disaster.

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  • Great thoughts in the article above!
    In fact, it is more than doubtful to push a scrapping premium 3.0 ...
    And if so, then under clearly (!) Environmentally friendly mind games ...
    With scarab green as the maximum solution it is not enough!
    It turns out that the German auto industry may have a) gambled away on the drive and b) assessed the ideas about mobility “differently”. It could indeed be a problem ...
    Then it will be different in the future. The future is always associated with change. Was like that, stays like that.
    As long as I use the May time for trips into rapeseed, lilac and hawthorn smells! (without scent tree on the rearview mirror)

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  • I can understand that some vehicle manufacturers enjoy a scrappage bonus, because in principle they would have the potential to make today's unloved Euro 5 & 4 diesels disappear, which, with a bit of luck, could make the unloved topic of hardware retrofits relatively elegantly disappear .

    It doesn't seem to me that politicians will be involved. For them, the problem with driving bans is apparently sufficiently solved at the moment and then there will probably be incentives to buy new cars, possibly linked to a form of climate friendliness that has yet to be defined.
    This probably does not lead to a higher inventory of vehicles, but what is traded in or sold privately does not end up in the scrap press, but on the market.

    How big it will be will be shown. There are enough jobs that cannot be done in the home office and some of the people who do them will need a new car in the meantime. If the purchase is sweetened and you are not at risk of unemployment, why not buy it?

    On the other hand, analyzes after the last scrapping premium have shown that it has increased the market share of importers and that of domestic manufacturers. If the manufacturers want something like this now anyway, one can of course ask whether they are already completely desperate or just can't think of anything better?

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  • The strategic nonsense, which the German auto industry fuses with political fidelity, is hard to beat.

    For the third time, a premium will most likely be paid for the disposal of cars, most of which will then be used in third-party markets. In a way, that would still be sustainable.

    There is no strategic thinking or action here. All this nonsense can only be described as completely counterproductive. Since I have been watching the car scene for decades, I am now increasingly finding that more or less pretty nonsensical cars are being offered at absolutely horrendous prices. There is much more inflation in car price developments than is expressed in the official rates (by the way, I am not a conspiracy theorist).

    A nice example in the trend for SUVs. First of all, if possible, every new model should have an SUV character, or at least an SUV variant. Then the “marketing experts” remember that many customers would also like to have a coupe. So you flatten the already ugly boxes in the roof area like a coupé.

    Then cars come out that look like having a steel plate weighing tons on them on the roof. Looks really great and is also particularly practical with the embrasure-like rear windows and side windows. And then it costs even more than the “normal” SUV variant. You only have to look at the current products from Mercedes and Rover. For me, beautiful and functional is somehow different.

    I fear that sales experts and absolute believers in progress will hold up to me that everything I have noticed here is somehow from yesterday, you are clearly right. My old purrs often weigh less than the new off-road monsters and tend to consume a little less. Unfortunately, they have neither hybrid nor pure battery technology. Of course, that's a thing of the past with a usage time of more than 20 years.

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  • @ Bukki2001, great writing! I see it exactly the same way and can stand 100% behind your comment. This ugly SUV Coupe, of course in dark black, if possible matt. You just have to see who is sitting in this cart. I keep asking myself, where does the coal come from for such show cars?

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  • First of all, everyone would be well advised not to demonize the car at any price, but to incorporate some reason again. E-mobility alone is not the future.
    Especially in difficult times like these it shows how important individual mobility is, in all income classes. And all income classes have the right to be mobile. You need a wide range of used vehicles for this. A scrapping premium would be out of place here.

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  • Maintenance premium 1.0

    In my haze there is a brand new Tiguan for which a Golf Variant has wandered into the scrap press for no reason (exchange bonus). And there is a 10 or 11 year old X3 that is strikingly similar to the Tiguan.

    Both have 2 liters of diesel with 150 hp each, identical consumption values, mileage and a green sticker each. Although there is at least a decade and a premium between the two cars ...

    Both owners told me about their trips in almost identical words. For example, that one got from A to B with an average of 6,6 liters and was very satisfied - with the old or with the new.

    Where's the progress? And what is the overall balance of the vehicles? Would it help the environment if the old followed the Gulf in favor of a new one?

    Strictly speaking, drivers of old cars deserved a maintenance premium. They save the environment from questionable new cars and their CO2 rucksack from their production, which they can never remove because the progress is far too marginal or even non-existent, like the example X3 (old) vs. Tiguan (new) clearly shows.

    You could of course also use a Saab vs. Tiguan count. The point is that the old ones are already produced, go without a backpack and create jobs in workshops. The environment, the economy and the owners of such cars would be served if there were financial incentives to maintain them.

    It would also send a strong signal from politics to the automotive industry to promote targeted jobs, sustainability and environmental protection. German money bombs, which are detonated somewhere in the atmosphere over a global production and globally scattered shareholders, must no longer exist.

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