Ifo Institute: Purchase subsidies are just a flash in the pan

The Ifo Institute also comments on purchase premiums to boost car sales. According to the Ifo Institute's study, while car sales would increase in the short term, hardly any more vehicles would be sold in the medium term. This is because the stimulus would typically only bring forward planned purchases but would hardly influence fundamental buying decisions. For the overview study, 15 data-driven investigations of scrappage premiums in Germany, Spain, the USA, and other countries were evaluated.

Therefore, study director Felix Rösel warns, also looking at the crisis years 2008/2009: "The scrappage premiums at least temporarily boosted car sales in the financial and economic crisis of 2008/2009, that is certainly documented."

But then, as Rösel explains, there regularly followed a crash in sales figures: "After the party came the hangover." Almost all studies showed, according to the Ifo Institute, that many consumers at the time simply brought forward car purchases that were already planned due to the premium:

"On balance, most studies give no indication that more cars are sold because of the premiums."

Incidentally, PSA also shares this view, critically assessing the French state aid for this exact reason. Purchase premiums for cars could also have unintended side effects on other sectors, the Ifo Institute reported, because those who bring forward a car purchase have less money for furniture or other larger purchases. Hence, Rösel warns:

"The plus for the car industry can therefore quickly become a minus for other sectors."

Furthermore, the effects of purchase premiums on the environment are not conclusively proven. In the USA, the scrappage premium reduced CO2 emissions because mainly small and fuel-efficient cars were promoted. In Germany and Europe, however, fuel and CO2 savings could not be proven. What does this mean?

What does this mean?

The current critical stance on purchase premiums remains justified, as the Ifo Institute has shown. Additionally, the uncertainty factor for potential customers remains high: Many are still on short-time work and are already earning less money. Added to this are the planned EU billion-dollar funds, which want to be repaid in the long term - possibly also through significantly increased tax revenues, debt forgiveness, or in the worst case, state bankruptcies. This additional medium-term uncertainty is likely to deter many potential buyers and fleet operators from investing money in new vehicles now.