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Cash for clunkers

By Peter McKay, 15 May 2009 Industry

Cash for clunkers

Audi Australia boss calls for incentives to scrap old cars to aid the car industry, road safety and the environment.

Audi Australia's ebullient managing director Joerg Hofmann has joined the car industry clamour for the free-spending Rudd Federal Government to offer serious financial incentives to lure Australians out of their older, less safe and environmentally unclean motor vehicles into new cars.

It's an imaginative scheme, he says, that has worked beyond expectations in his home country of Germany and would also be a resounding success here.

The outcome would be the end of a fleet of polluting, unsafe and thirsty old passenger cars, replaced by new, models with low tailpipe emissions, a raft of safety features and better active safety. Their sales would provide a great stimulus for the struggling Australian vehicle industry.

Hofmann says the German scrappage bonus of 2500 euros applies to cars at least nine years old. The original forecast of 600,000 consumers willing to scrap their old cars and use the bonus money to buy a new car was readily exceeded. "Around 1.4 million people have applied to be part of the scheme," said Hofmann, adding that the German market is now running 20percent better than last year in defiance of the economic mess affecting most of the rest of the world.

Hofmann says Audi Australia has calculated that a green scrappage scheme here, if introduced with an A$2500 incentive, would be "almost self funding" due to the Federal Government's tax take (GST, stamp duty, and in some cases, import duties and LCT) from the new cars sold. (On a $20,000 car, the government gets roughly $2500 in tax revenue, he said.)

Hofmann points out that the average age of the Australian passenger vehicle is around 10 years - among the worst in the developed world. Around 2.47 million (21 percent) of our cars are older than 15 years.

"Yes, there would be some pull-forward in new car sales but the scheme would also encourage those consumers who in normal circumstance have never bought a new car, to go out and do so," Hofmann went on.

Hofmann says the idea - at this stage nothing more than food for thought for the Federal Government to stimulate new vehicle sales - has support from fellow top-end importers Mercedes-Benz and BMW, and from the FCAI.

He concedes that such a scrappage stimulus scheme would not be especially helpful for Audi and the other premium importers, although "I think we'd benefit from extra A3 sales and getting rid of demonstrator models".

"The biggest beneficiaries would be Holden and Ford and anyone with cheap, small cars.

"I believe it can turn Australia from having a heavily declining car market into one of positive growth," concluded Hofmann.

The UK government has now followed Germany's lead, announcing it would introduce an incentive scheme to encourage owners of bangers at least 10 years old to trade them in for a new model. The lure is 2000 pounds...

Audi draft calculation

Example - Australia (rough calculation based on $2,500 environmental bonus)
Duty 1,290.60 (Federal tax)
List price of car 16,981.82
GST 1,698.18 (Federal tax)
RRP 18,680.00
Stamp duty 760.00 (State tax ie NSW)
Drive Away Price 19,990.00
Government earnings - current
Imported cars 3748.78
Locally produced 2458.18
(Less Environmental Bonus of $2500)
Imported cars 1248.78 9 (Earnings)
Locally produced -41.82 (Earnings)