FRANKFURT: Germany's landmark car scrapping bonus ended on Wednesday after hitting two million auto sales and giving life support to the sector which now faces severe withdrawal pains next year.
Several analysts said the number of scrapping subsidies handed out was excessive even for Europe's biggest car market, and would leave dealers of small foreign cars in trouble when buyers shun showrooms in 2010.
But the controversial measure has clearly boosted car sales during the depths of the global economic crisis and it led to similar programmes being enacted worldwide.
German auto sales jumped by 28 percent in August from the level 12 months earlier, extending a string of strong monthly results, data released by the VDA auto federation showed.
The "cash-for-clunkers" bonus of 2,500 euros (3,550 dollars) for drivers who junked old cars and bought a new one brought total sales since January to almost 2.7 million autos, 565,000 more than in the first eight months of 2008.
Programmes in Japan and the United States pushed car sales higher in August for the first time for more than a year, while dealers in countries like China, France, Italy and Spain have also been helped by state subsidies.
The question is what lies ahead for an industry crucial to many global economies.
In Germany, "we will see a steep decline in the market," Metzler Bank analyst Juergen Pieper told AFP.
Starting in early 2010, "you will see two or three very weak quarters," he forecast.
Ferdinand Dudenhoeffer from the Center for Automotive Research forecast German sales would fall by one million to around 2.7 million cars next year.
"It will be the largest downturn ever realised by the German car industry," he warned.
Both analysts said the government had overshot the size of the scheme, with Dudenhoeffer commenting: "It makes absolutely no sense to offer two million scrapping premiums if you have a market of around three million cars per year."
The programme tripled from its initial size and will cost Berlin roughly five billion euros in all.
Used car prices were pushed lower meanwhile and small repair shops had fewer customers, Dudenhoeffer noted, while some retailers complained that other major purchases had been postponed as consumers rushed to buy new cars.
A study by the Roland Berger consultancy published last month estimated more than 90,000 jobs were in danger as the German scheme wound down unless the economy rebounds next year.
German luxury car makers did not profit greatly from the scheme however, and will probably suffer less now that it has expired.
BMW production chief Frank-Peter Arndt told the daily Passauer Neue Presse: "We were not particularly pleased by the scrapping premium because it disadvantaged premium brands like ours.
"We will be less affected by its end."
The bonus was nonetheless the most popular and visible element of a vast government economic stimulus package which included a 17.5-billion-euro credit stimulus announced on Tuesday.
Germany, which has earmarked 115 billion euros to support industry, seems to be pulling out of its worst recession for six decades as a result, and posted growth of 0.3 percent in the second quarter from the first three months of the year.
Stimulus packages are expected to push the public deficit up to six percent of output next year however, twice the eurozone limit.