Fiat's sales in Italy could be hit next year as the government is set not to renew state subsidies for buying low-polluting cars with reports suggesting that the market could shirk by up to 13 pct next year.

Italian state subsidies to buy new cars, a measure that has boosted the market, won't be extended into 2008: the amendment hasn't been presented in the budget law, was not included in the confidence votes, and won't be included in the end-of-year decree, apparently.

The initial proposal for next year envisaged a bonus of 700 euros to buy a Euro4 or Euro5 compliant vehicle if a Euro0, Euro1 or Euro2 vehicle that was bought before 1 Jan 1999 was demolished. This was slightly down from the previous 800 euro figure, but that was offset by the benefits for Euro2 cars. The measure was to include a road tax exemption for two years if the demolished car was a Euro0, and one year for other cars. Another 350 euro subsidy was to go for the installation of LPG or methane systems for Euro0-Euro3 cars, up to 650 euro for Euro4-Euro5 cars: authorised expenditure 110 mln euro (instead of 100mln) for every year, 2008, 2009 and 2010.

The news has slowed down the Fiat stock on the Italian bourse and leaves some doubts for the car market next year. Recently, UNRAE pointed out that in 2007 car sales had soared by 6.6 pct, namely 2,480,000 new cars sold. UNRAE president Salvatore Pistola claims that 21 pct of sale contracts were due to state aid for the demolishing of polluting cars. He also said they helped reduce the number of polluting cars circulating, leading to a positive impact on the environment, and benefits for the Inland Revenue (62.5 mln euro). Promotor studies centre claims the failure to renew the measure may lead to a 13 pct drop in car sales next year.

With a market share of over 30 pct, Fiat Group stands to be a major loser from the withdrawal of the scheme, especially as it has a string of popular selling, low-polluting cars, including the Italian market's best seller, the Grande Punto, and the second most popular model, the Panda. Other economical cars in its portfolio include Fiat's 500 and Bravo as well as Lancia's Ypsilon and Musa.

By the end of last month the Fiat Group had seen total registrations of 730,184 vehicles so far this year, up an impressive 8.52 pct the same period in 2006. It now has a 31.37 pct share of all market sales YTD. The Fiat brand is by far the best performer, 562,014 sales YTD puts it up an impressive 9.94 pct year-on-year. Meanwhile for YTD, Lancia (98,307) is up 5.68 pct, while Alfa Romeo (68,647) is up 1.58 pct. This puts the Fiat brand on 24.14 pct of all sales YTD, Lancia on 4.22 pct, and Alfa Romeo on 2.95 pct.