Cars sales have plummeted but incentive jump-starts hope

New car sales plummeted more than 60 percent in the second half of last year but dealers believe that a planned state incentive aimed at getting consumers to upgrade their vehicles will help ease the sector?s pain.

Data from the Association of Motor Vehicle Importers-Representatives (AMVIR) showed on Friday that new car sales fell at an annual clip of 62.6 percent between July and December last year to 42,968.

With Greece entering its third straight year of recession, plunging consumption has weighed heavily on new car sales, hurting the labor market and government revenues.

The sharp drop in car sales has wiped out almost 15,000 jobs in the sector, representing 17 percent of the total work force, since the start of 2009, AMVIR said in a statement.

For 2010, the government raked in 550 million euros from value-added tax and a new vehicle levy, down from 940 million in the previous year, it added.

Industry officials are optimistic that a planned cut to new car tax encouraging drivers to pull old vehicles off the road will help provide the sector with a lift, but have warned the success of the measure will depend on the willingness of banks to provide consumer loans.

?Lending is very tight. Banks may not ease their policies until the second half of the year, waiting for an improvement to the economy,? said a senior industry source.

In changes approved by lawmakers recently, car owners that substitute vehicles aged more than 12 years old will qualify for savings of between 500 and 2,000 euros.

The starting date for the incentive is likely to be in the middle of January and it is seen running until the end of the year.

?The incentive could help add 20,000 vehicles to annual car sales this year by boosting consumer sentiment,? Andreas Bourbaris, commercial director at Fiat Group Automobile Hellas, told Kathimerini English Edition. The total sales for the year could reach between 150,000 and 160,000 cars, Bourbaris added.

[email protected]