The economy has caused difficulty for many firms, not least those in the car industry. Car firms employ significant numbers of workers and in many countries are also important for exports. When recession hits, households tend to reduce their demand for cars, keeping their existing cars for longer. This has made car firms especially vulnerable in periods of recession. recession that has afflicted the global
If governments perceive the car industry to be of strategic importance to their economy, then it may be desirable to intervene in order to try to maintain the level of demand, in the hope of avoiding excessive job losses. Car scrappage schemes represent one approach to this. By offering a subsidy to people scrapping old cars in order to buy a more recent model, it may be possible to stimulate the demand for cars. Such policies were introduced across Europe during the recession; most ended in 2010. This article offers an evaluation of such policies in the EU in the context of trade and competition theory, political and socioeconomic considerations and industry data.
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