Vehicle replacement program injects fuel into stalling local car market

Newsroom 01/03/2010 | 11:09

The delay in this year’s car replacement program sent sales crashing in the first two months of this year. Industry representatives told Business Review that the local car market will get into gear only now that the program has received the green light. The government scheme to subsidize new cars for drivers who trade in their old clunkers comes with important changes, which have triggered split opinion among auto movers and shakers.

By Dana Ciuraru

 

Almost two months late, this year’s government car replacement program has finally been given the green light. The major market players have been eagerly awaiting the start of the scheme, a critical injection of fuel for a market which plummeted to about 3,000 cars sold in January, from more than 20,000 units two years ago.

“The delay in starting the car replacement program this year was keenly felt during January and February, when we suffered a dramatic decrease in car sales, even given the already low volumes registered last year,” Brent Valmar, Porsche Romania GM, told Business Review. The firm is the importer of the Seat, Porsche, Skoda, Volkswagen and Audi brands.

This year’s EUR 55.6 million (RON 228 million) scheme has several new features. The program will unfold in a single stage and companies are also permitted to participate, not only individual drivers as has been the case until now. Also, for every old vehicle traded in the owner receives a RON 3,800 voucher, individuals being able to claim and use up to three vouchers to acquire a new car. For individuals, participation in the scheme is unlimited, while for companies a EUR 200,000 limit has been stipulated. “The program will boost new car sales for the coming period. A definite plus is that this year the program allows drivers to trade in up to three cars, which will translate to a state subsidy of RON 11,400, making it much easier for the buyer to fund the purchase of their new vehicle. Also, including leasing in this program will positively affect its results,” said Valmar.

Other carmakers also praised the changes. Rafael Treguer, marketing manager at Renault, told BR that he welcomed the fact that this year’s program included all makes of car with no more brand ratios stipulated.

“We estimate that the local car market will stabilize in the second half of the year and car sales will get back on track as a result of this year’s car replacement program. Our target is to reach at least the same results as we registered with the program last year, based on these changes and the new promotions we have revealed,” said Treguer. Renault has announced that models such as the Fluence and Symbol can be bought through the car replacement program at savings of EUR 5,600 and EUR 4,600 respectively.

Moreover, Dacia has trumpeted that with three vouchers and an advance of EUR 1,219, a Logan Sedan can be bought for EUR 1 per day, while a Sandero retails at EUR 4,180. The flagship local carmaker is seen by market specialist as the scheme’s the main winner, as other importers charge higher prices. Similar price strategies have also been announced by Chevrolet, where a Spark has a starting price of EUR 1.70 per day.

But not every carmaker is singing the scheme’s praises. Other market players say that one of the main disadvantages of this year’s program is that it gives birth to a speculative voucher market, to the detriment of the final customer who wants to buy a new car.

Both the authorities and some industry players are hopeful about the program’s results. The authorities expect to take an average of 213 old cars out of commission per day by the end of the year. “The sum allocated to the program this year allows us to disable 60,000 cars. If that money is used up we can increase it. We have at our disposal this year RON 1.8 billion for environmental projects,” said Laszlo Borbely, environment and forestry minister.

The Porsche Romania GM predicts that by the end of the year some 30,000 new vehicles will have probably been sold through the car replacement program, which according to his calculations will mean about 90,000 clunkers taken off the road.

With a flexible car replacement program, representatives of the main car firms on the market estimate that at the end of the year the auto market will reach a maximum of 115,000 cars and 15,000 commercial vehicles. Positive effects could include the stabilization of the economic decline, the start of a growth curve and the resumption of lending. But none of this is a done deal.

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