European officials go wild with new car incentives for buyers

— -- European governments are giving price discounts directly to buyers of new cars, hoping to stimulate sales for troubled automakers, fuel national economies and replace older, more-polluting cars.

The explosion of simultaneous plans has astonished analysts.

"Europe seems to be going quite mad, launching schemes to help," says Nigel Griffiths, chief auto economist in consultant IHS Global Insight's London office. "Very good job; very fast. All done independently in the past six or seven weeks."

IHS says the sweeteners will "put a floor under the European market" some 500,000 car sales higher than without the discounts, for an estimated 11.7 million instead of 11.2 million this year in Western Europe.

Michael Robinet, vice president at consultant CSM Worldwide, predicts the discounts will have broad impact: "Spur the auto industry, generate financing activity, increase tax revenues and change the (environmental) footprint of vehicles on the road."

The only recent U.S. measure is a provision to eventually deduct sales tax on new car purchases on the next income tax filing, reducing tax owed then by a few hundred dollars or less.

More aggressive measures were proposed, but none made it into the American Recovery and Reinvestment Act — the federal stimulus plan — signed into law Feb. 17.

European upfront discounts range from 1,000 to 2,500 euros ($1,269 to $3,174 at recent rates), Griffiths says. Separately, the U.K. sliced 2.5% from car prices by cutting the value-added tax baked into sticker prices, he says.

Most plans also require a buyer to turn in a car at least 9 years old to be scrapped to get a discount voucher.

Some, including Italy and France, limit use to new cars with specified, small carbon dioxide emissions, which are directly related to fuel mileage. Griffiths says the limits equal a U.S. fuel economy rating of about 42 miles per gallon in mixed driving.

The discounts are "the carrot not the stick. Consumers get to make up their own minds," Robinet says. "In the U.S. it's the CAFE stick: 'Thou shalt buy this kind of vehicle.' " The federal CAFE (corporate average fuel economy) standards require companies to make cars meeting a fixed average.