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European Car Scrapping Schemes – Recent market share changes unlikely to persist once scrapping sche

The report notes that “in total, almost 2 million car purchases will have been supported by the German programme, providing a clear boost to 2009 vehicle sales. Based on preliminary data, year-to-date new car registrations in Germany as at August 2009 amounted to 2.7 million, a 27% year-on-year increase. We believe that the German programme was particularly well received by customers and that the volume impact of schemes in other European countries will be less pronounced. However, the overall implications should be broadly similar, i.e. we expect a shift towards smaller cars and believe that a substantial portion of vehicle sales has merely been brought forward.”

We have analysed the effect of the German scrapping scheme on the domestic market and conclude as follows:

· Makers of smaller cars such as Fiat, Skoda and Hyundai have benefited most from the scheme.

· In contrast, premium brands such as Mercedes, BMW and Audi had a disproportionately small share of incentive-driven purchases.

· Due to the higher portion of smaller cars, we believe 2009 industry revenues will lag behind unit sales.

· We estimate that approximately one half of purchases supported by the German scheme were merely brought forward and would likely have been made during coming quarters anyway.

· We caution that those countries with “successful” scrapping schemes will likely see a notable decline in car sales once the programme runs out.

· For Germany, we expect over 3.5 million car sales in 2009 after 3.1 million in 2008. For 2010, we anticipate around 2.7 million new sales.

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