German auto sales leap with payment for scrapping old cars

BERLIN -- Auto sales in Germany last month boomed to their highest level in 10 years, spurred by the German goverment's bonus to people who scrap older cars and buy new ones, an industry group said Tuesday.

Germany's goverment discounts for new-car buyers is Europe's most generous — 2,500 euros, or $3,134 at Tuesday's exchange rate. A buyer has to trade in a car at least 9 years old and agree to let it be scrapped.

Other European countries offer similar discounts, but those range as low as 1,500 euros.

New-car registrations in Germany were up more than 21% to 277,800 in February compared with the same month last year, VDA said. It was the highest February sales level for 10 years and the first time in more than six months that sales have grown, said Matthias Wissmann, VDA chairman.

"We expect that, in the first quarter as a whole, domestic sales will be above the previous year's level," he added.

VDA said new registrations of German companies' cars rose 9% to 172,700 in February, while foreign brands saw a 48% increase to 105,100.

However, the improvement at home contrasted sharply with a steep drop in exports, which were down 51% on the year in February to 201,900 cars, VDA said.

Germany's 2,500 euro incentive is part of a wider 50 billion euro economic stimulus plan.

The program not only whips up auto sales, it boosts tax revenue. And because it scraps an older car for every new one, it tends to boost fuel economy and cut tailpipe emissions.

The U.S. has balked at direct-to-buyer programs. It limits new-car purchase incentives to a tax deduction for the amount of sales tax on the new-car purchase — a benefit worth only a few hundred dollars, at best.