Cash for Trash – The Germans Got it Right
Posted by: Kwame Owusu on 14 Mar 2009Filed under: Features, Government/Legal, Green
In my last article regarding GM’s rejection of a $2 billion cash infusion, I asked what GM and the U.S. government were doing about getting people to buy cars (see here). Getting people to buy cars should be the top priority for both parties. An interesting new scheme may help alleviate this problem. I’m sure some of you have heard of the German “Cash for Trash” model (or something along those lines), the model whereby people are given a large cash incentive to trash their old cars for more fuel-efficient ones. It has proven to be very successful:
Amid the gruesome headlines generated by the world’s auto industry these days, it almost read like a typo: new car registrations in Germany rose 21% year-on-year in February, the country’s Association of the Automotive Industry (VDA) announced March 3. This, though, was no error. The 278,000 cars put on the road, crowed Matthias Wissmann, VDA’s president, amounted to “the highest level of sales in the month of February for ten years.”
Why the splurge? German drivers have latched onto a juicy new deal. Under a scheme started in January, car owners who trade in a vehicle more than nine years old for a new, greener model can expect $3,172 from the German government as well as a break from paying road tax for at least a year. Similar “scrapping schemes” have been launched in recent months in France, Italy and Spain. Now motor manufacturers in Britain are pleading with its government to follow suit.
This is truly marvelous. Germany saw a large increase in its auto sales in February while here in America, it was a slaughterhouse (see here). Don’t you think we need something like this here in America? It will be like killing three birds with one stone – 1) it will bring some life into the distressed economy, 2) help the distressed auto sector by getting people to buy cars, and 3) help make America a greener, healthier place to live.
This “cash for trash” scheme ties in very well with the Obama government’s initiatives to stop the recession, help the domestic automakers back on their feet and make America an energy-efficient country. And given that many other countries are using (or plan to use) this model, it is highly unlikely that anyone would call it protectionist if the U.S. uses it.
But I suppose that with the billions and trillions of dollars being handed out by the U.S. government to the banks and other industries, something like this would be too expensive to afford. It will be a big loss if such a scheme (or anything with similar effects) is passed on.
[Source: Times]
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Maybe nissan should stop making vehicles that last so long. Then maybe americans will be forced to buy new cars!
To the Anonymous that wrote on March 15, 2009 12:39 AM,
Nissan is not the only automaker in the auto industry, you know?
Maybe the US should use fair trade instead of being looted by free trade. Let’s face it, Japan targeted US markets and devalued currency to gain share. Now we pay
I agree with the post above – the Japanese don’t play fare. Why does the U.S. and other countries for that matter tolerate this?
The Japanese pretty much whipped out the US Consumer Electronics manufacturers… and they did the same for the US Automakers… so why not let them have a dose of their own medicine.
This article has nothing to do with Japanese manufacturers. Most of you are just whinning lazy Americans.
Um, thats kinda my fault… lol I posted the first comment on here about nissan…(cuz I own one). Its true they are not the only auto manufacturer; but they, along with toyota, honda, and subaru have proven to make vehicles that have a life span that doubles, and sometimes even triples that of american cars. But as the previous person said, this has nothing to do with japanese auto makers. I actually only posted that cuz its true. I thought it was funny and I wanted to see what type of responses I’d get out of it.
Take care
The Notorious MDB,
The Japanese automakers, particularly Toyota and Honda, did make more reliable cars (and they still do, many would say)than their American counterparts, but you can’t really say the same about Nissan, Mazda and the other Japanese automakers. Their reliability was as bad, if not worse, than the Detroit automakers. It is only recently that they have made headway in their reliability, much like the Detroit automakers.
The downside to this program is it removes a lot of affordable used cars from the market. The scrappage plan, long term, makes it a lot more difficult for the poorer people among us to buy used cars because perfectly fine used cars, in running condition, are scrapped because of their age. (Collectors hate this legislation, too, because it removes a valuable source of parts.) There are better ways to stimulate car sales without hurting the poor.
Keith
usedcars.about.com
Keith, I have come to realize several downfalls of this new scheme, but this is the first time I’ve heard someone say it puts the poor at a disadvantage. I wholeheartedly agree. That is why I believe this scheme would be most beneficial for all in the long-run if it was implemented temporarily (as an impetus to get the U.S. economy going again) and not permanently.
This will definately help the American auto industry…but are they just going to fall back into their old habits…..making cars no one wants?
There’s some points I can’t help but wonder with this plan.
For example, have the auto companies changed so much that their business model now makes sense? Before the only benefit to selling more was to keep cash moving. It doesn’t fix or change anything if the big car makers sell more cars, they need to make sure they make money on selling cars.
Second, scrapping ‘old’ or ‘junk’ cars. Is a 9 year old car that old and junky? Does scrapping a car and building another in its place really improve the environment that much? Sounds like the typical North American corporate consumerism policy to me. Why don’t the auto manufacturers look at aftermarket parts, enhancements or engines that will improve existing cars. There’s money in parts, upgrades and performance as well.
Finally, this whole cash for trash idea is just a roundabout way to offer a bailout without it looking like one. The refunds and road tax credits still come out of tax payers pockets just in a more sneaky way.