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Car Sales in Germany Rise in February, But Future Still Cloudy

Government bonuses for people to scrap old cars and buy new ones led to a 21.5 percent boost compared to the previous year. But this bright figure can't conceal that the general outlook for the industry is gloomy.

VW assembly line

VW is one of the brands that have profitted from consumer incentives

The German Association of the Automotive Industry, or VDA, announced on Tuesday, March 3, that a total of 277,800 vehicles had been sold in February.

"These are the highest February sales for 10 years," VDA President Matthias Wissmann said at a press conference on the margins of the International Motor Show in Geneva, Switzerland.

"New car registrations are back in positive territory for the first time in six months," Wissmann added. "We expect a rise in new car sales compared with last year over the entire first quarter."

The good numbers have come after the German government offered consumers a bonus of 2,500 euros ($3,150) to scrap older vehicles and buy new, more energy-efficient ones.

Figures have been strongest in the compact-car sector, not a traditional strength of German manufacturers, but Wissmann said domestic production was also benefitting.

"An initial analysis shows that one in two consumers who scrap their old cars chooses a model made by a German company," Wissmann said, adding that the industry was hoping to break the 3 million mark for new car registrations in 2009.

Still, overall, German carmakers' -- in particular Mercedes and BMW's -- share of their own domestic market declined. Fears abound that true recovery for the industry is still a long way off.

Sales abroad plummet

Cars at a scrapyard

More cars at the scrapyards mean -- temporarily at least -- more new-car buyers

As good as the domestic numbers were, figures for German car exports were down dramatically, falling by more than 50 percent in February to just over 200,000 vehicles. Production was also cut back by 47 percent.

"Despite the positive domestic numbers for February, we're far from a sustained recovery on the world-wide markets," Wissmann said.

In France, new car registrations were down by over 13 percent, despite similar governmental consumer incentives. Drops in Spain and Japan were 48.8 and 32.4 percent respectively.

German carmakers hope their export figures will improve as economic stimulus measures taken by foreign countries begin to kick in. The industry also pointed out that, while sales abroad are down drastically, German-made cars have made slight gains in market share in countries from China to the United States.

"It shows the strength of German brands that they could increase their share of strategically important markets under the most difficult of conditions," Wissmann said.

So for German carmakers, the proverbial glass is both half-full and half-empty. If stimulus packages worldwide begin to work, the German automotive industry could start to rebound as early as the end of 2009.

But if foreign markets stay sluggish, then the premium for scrapping old cars won't be bridge between recession and recovers, but rather a one-off boost with few long-term effects.

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