German auto sales up sharply on trade-in incentives

10:15, 06 March 2009
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VDA had previously forecast...

German new car sales jumped 22 percent in February, beating the auto industry slump on the back of a government scheme to encourage buyers but exports slumped, industry group data showed on Tuesday, according to AFP.

Auto industry federation VDA said 277,800 vehicles were sold in Germany last month, "the strongest level of February sales in 10 years."

"We expect domestic sales will be higher for the entire first quarter," VDA president Matthias Wissmann said in a statement.

The gain was explained in large part by government incentives worth 2,500 euros (3,150 dollars) to scrap an old clunker for a new car that pollutes less and keeps automakers going during a global crisis ravaging the industry.

"New car registrations have swung back into positive territory for the first time in six months," the VDA said.

"We may be able to reach the level of three million this year despite the difficult environment," it said, in an upbeat tone unusual among all the negative commentary as major car makers seek state help to keep them going.

VDA had previously forecast full-year sales of 2.9 million vehicles in 2009, which would represent a drop of 6.0 percent.

At the same time VDA had no good news on the key export front, with February overseas sales -- once the lifeblood of German auto firms -- slumping 51 percent from a year earlier with production cut 47 percent.

With little sign of any early recovery, German automakers are likely to have to depend on the domestic market for some time to come.

Opel, plunged into crisis by struggling parent US giant General Motors, said last month it was increasing output at one plant because of strong demand for its Corsa compact model.

The US government has poured billions of dollars into GM and Chrysler to keep them afloat while they chart a radical restructuring, with other companies around the world seeking similar state help.

Germany, the Europe`s biggest economy, has done better so far than many other major auto producing nations.

In France, new car registrations are down 13.1 percent despite a similar government incentive scheme while in Spain they tumbled 48.8 percent and in Japan 32.4 percent, according to recent data.

Wissmann said "we are far from a sustainable rebound in global auto markets" and German car makers have cut output to adjust to falling demand overall.

He remained optimistic and said that if the German government`s plan were replicated elsewhere, "we might see a rebound in global auto sales in the second half of the year."

At the UniCredit Group, economist Alexander Koch said: "We think the old auto scrapping premium makes sense" even while noting that foreign brands like Dacia, Fiat, Peugeot and Skoda "accounted for the majority of expected additional sales.

"The brutal recession will continue unabated in the next few months and the German economy is in desperate need of positive impulses until foreign demand stabilises again," Koch said.

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