German car sales dive on scrappage anniversary

German new car registrations in August were 27 percent lower than a year ago when buyers enjoyed the last of the government's car scrappage incentives, according to official data published on Thursday.

Germany's motor vehicle department KBA said in a statement that roughly 20,885 new cars were registered with the authorities last month -- a drop of 27 percent versus the year earlier when the government was still subsidizing their purchase via a fleet renewal program.

Even when compared with two years ago, demand still contracted. In the eight months through August, registrations fell 9.6 percent to 1.9 million vehicles via the comparison period from 2008, when the market was not distorted by the scrappage scheme often referred to as "Cash for Clunkers."

This time last year, the agency responsible for managing the program said that all 5 billion euros ($6.4 billion) in the pot of government money had been exhausted, harkening the end of a consumption craze that inflated the market to 3.81 million vehicles -- a level last seen in 1992.

Auto industry analyst Ferdinand Dudenhoeffer believes the division has remained between the market for small cars bought by retail customers, which were the sole winner of the Cash for Clunkers program, and corporate cars that tend to be larger and dominated by premium brands.

"Incentives for the overall market may have declined last month but for the small car segment alone they have risen to a level never seen before, if you strip out the 2,500 euros from the government's scrapping scheme last year," he said.

"This will likely subside once private demand recovers starting around March 2011."

On Wednesday, car sales figures for the key U.S. market showed the weakest August since 1983 while sales in rival market of China grew a whopping 59 percent -- underlining the change in roles of the two biggest economies in the world.

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