While everyone else struggles with the global economic crisis there is one area of the motor industry that is doing rather well – German new car sales.

In February a report from the German Automobile Association showed a 21 per cent year-on-year increase. In March sales climbed by a massive 40 per cent.

The 401,000 new passenger cars registered in Germany in March represented the biggest volume for that month since 1992.

Dealerships across Germany are reporting continuing strong interest in affordable new models, and many are awaiting delivery of new stock simply to fill their showrooms.

In fact, overall sales in the first quarter of 2009 have risen by 18 per cent. All of which has led Matthias Wissmann, president of the German Automobile Association, to suggest that the German car market will top three million sales in 2009.

To put this in perspective, until recently overall sales were expected to sink beneath 2.1m.

This lift is almost entirely a consequence of Germany’s scrappage scheme, officially called the Umweltpraemie (environmental rebate). Scrap a car over nine years old and you get €2500 (£2283) towards a new one.

All in all, it has been a remarkable turnaround on January’s 14.2 per cent drop in domestic sales, leading many industry heavyweights like Volkswagen chairman Martin Winterkorn to throw their full support behind the scheme.

In Britain there has been pressure on the Government to introduce a similar scheme in the hope it would rejuvenate our flagging market.

But even if the idea of a scrap incentive were to gain traction in the UK, there is no guarantee it would directly favour local manufacturers or help bolster production in British-based factories.

Seventy per cent of cars built in the UK are exported. In Germany the VW Polo has sold well under the scheme — but it’s made in Spain.

Critics of Germany’s scrapping program also argue it has already begun to affect the profitability of small businesses. Private workshop owners, who depend on repairing older cars, are up in arms.

They say it robs them of potential business. And used car dealerships right across Germany have seen a dramatic reduction in buyers in recent months, causing many to go out of business.

This is of course coupled to the concern that classics, which may even be worth more on eBay, are being scrapped to make quick cash towards new cars.

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