German Luxury Auto Brands Dinged by Scrapping Scheme
There are some interesting findings from Moody’s analysis of the impact of European “cash for clunkers” schemes. German automakers all appear to have lost market share under the German scrapping scheme, with luxury brands faring the worst. Makers of “cheap and cheerful” cars were the main beneficiries, with Skoda, Fiat and Hyundai all more than doubling their market share (albeit from a small base).
German brands were the only ones that lost share and even GM’s up-for-adoption Opel unit managed to boost its share. OK, so it’s almost a German brand.
VW maintained its overall lead despite losing over 2 share points while sales of Audis, BMWs and Mercedes Benzes plummeted to below a 2% market share from 8%, 9% and 10% respectively. Of course, buyers of more expensive automobiles are not the primary targets of these schemes, and no doubt some of theses share losses will be recouped now that the scheme has ended. But will they all?
Moody’s said the incentive programs have helped contain the revenue decline at OEMs and auto suppliers and have given the industry time to adjust its cost base to a lower level of demand.
However, Moody’s believes they have resulted in a significant “pull-forward” effect, i.e. they have increased demand only temporarily.
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.
“Moreover, as most of the schemes have driven up demand for smaller (and thus lower-priced) vehicles, industry revenues are likely to lag behind volumes in 2009. The mix-effect will also have a negative impact on profit margins as large cars are often more profitable for OEMs than smaller vehicles and have a higher portion of optional equipment with high margins for suppliers. In sum, the scrapping schemes will not prompt any rating upgrades.”
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