Page last updated at 17:57 GMT, Wednesday, 4 March 2009

BMW urges UK scrapping incentive

By Jorn Madslien
Business reporter, BBC News, Geneva motor show

A Fiat car
Producers of small cars benefit the most from the German scrapping tax

BMW's only British board member has urged the UK and other states to adopt a scrapping incentive that has sparked a 21% rise in car sales in Germany.

In an effort to bring down overall emissions from cars on the road, the German government is paying 2,500 euros towards the cost of buying a new car.

The money is paid to anyone who at the same time scraps a car that is at least nine years old.

"The key to this is that it is simple," insists BMW's Ian Robertson.

He points to a less effective scheme in Spain that he deems too complicated.

The German scheme sets out to support the sale of 600,000 cars this year, and as such it has the additional - supposedly incidental though the verdict amongst industry watchers in Geneva is that it is intentional - effect of helping the troubled motor industry cope with recession.

"It has been incredibly successful," says German automotive journalist Joachim Staat from Auto Bild.

Half price

A Ford car
UK factories would benefit from greater sale of small cars, says Mr Robertson

In Germany, many who had not thought about getting a car have ventured into the car showrooms, according to Mr Staat.

Some of them have bought bigger, better and more expensive cars than they had initially intended to, he adds.

This is because dealers have been quick to take advantage of the situation by discounts of their own to match the government's incentive, he explains, pointing out that "you can get a Fiat for 5,000 euros, which is half the ticket price".

Large impact

The scheme tends to favour small cars, though that is no bad thing, according to Mr Robertson, whose company is skewed towards selling larger, more luxurious cars and as such benefit less directly from the scheme.

"Small car producers - like Fiesta, Corsa, Clio and Logan - will see a boost," he says.

I am not a proponent of the scrapping scheme that is applied in Germany
Dieter Zetsche, chief executive of Daimler

Within a UK context," he continues, "there's an awful lot of small cars being made in the UK, from Nissans to Hondas, to GM products and to our Mini".

In addition, a shift towards smaller cars will deliver "CO2 emission improvements on a big, big, big scale", declares Mr Robertson, who is chairman of BMW's subsidiary Rolls-Royce Motor Cars as well as the head of BMW Group's marketing efforts.

"Thousands, or hundreds of thousands, of tonnes of carbon dioxide will be taken off the road," he says.

Long-term impact

Dieter Zetsche, chief executive of BMW's main rival Daimler, which owns Mercedes, disagrees.

"I am not a proponent of the scrapping scheme that is applied in Germany," he says, insisting that governments should act to make structural changes to the economy in an anti-cyclical way rather than try to change consumer behaviour.

Governments should focus on fixing the banking system, or offer loan guarantees, thus freeing up lending to car buyers and the corporate sector, rather than meddle directly with initiatives such as the German scrapping scheme, he insists.

Such "short-term 'fires', although sometimes beneficial in the short term, simply store up problems for the future, in that they "typically lead to another dip", he reasons.

Economic gain

Mr Robertson chooses to focus on the current problems and believes the UK government should act quickly.

"From a fiscal point of view, I doubt if it is costing any money," he insists.

"The 2,500 euros put in are probably offset by the VAT [value added tax] on the cars that are being sold, which would not have been sold otherwise," he says.

In addition, "it is keeping suppliers and dealers going, and therefore it is having a good effect on the economy", reasons Mr Robertson.

"It is now March, the year is ticking and the economy is struggling. Let's see what can be done."

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