German Scrappage Fraud Investigation on the Way

The German federal criminal office, BKA, has begun a fraud investigation based on the suspicion that thousands of traded-in vehicles have been smuggled abroad instead of being junked, Autonews reported. The number of vehicles illegally transported in Western Europe and Africa is said to stand at 50,000.

"The markets are virtually insatiable. Eastern Europe and Africa have a backlog of demand for used vehicles," BKA Vice President Wilfried Albishausen told Reuters. "The profit margin is enormous. If we assume that it is in fact about 5 percent to 10 percent of vehicles, that is about 50,000, then this is a profit of about 125 million euros - 2,500 euros per car."

The German car scrappage scheme offers 2,500 euros to anyone putting a car nine years or older in the crusher and buying a new one. The scheme runs until the end of 2009 and the success it had in Germany has inspired other countries, including the UK and US, to set up their own schemes and incentives.

Warning about the scheme turning into a possible breeding ground for organized crime has been around since the beginning of the year. Then, a Monitor TV team managed to sell a supposedly shredded car to Poland. After that, they sold it to a Lebanese trader who exported it to Africa. As if this wasn't enough, they have finally registered the supposedly culled car again in Berlin, ready to take advantage of the stimulus program.

The government was then, as it is now, willing to take the risk. According to erman Finance Minister Peer Steinbrueck, "you can never entirely rule out a certain amount of abuse."