Cash for Clunkers Did its Job
Well, now that we're a few days past the final final deadline for the Car Allowance Rebate System, we can start getting a handle on what it's going to mean for the U.S. auto industry.
First off, it's obvious that the program accomplished its two key goals of selling more cars and increasing the fuel economy of the overall U.S. fleet. The Department of Transportation is saying at least 625,000 CARS transactions were completed by the program's end, while Consumer Reports has sifted the data and come up with a 9.2 mpg improvement when comparing vehicles bought under the Clunker program with those turned in. The clunkers themselves averaged approximately 15.8 mpg and their replacements averaged about 25 mpg.
Once you get beyond these numbers, however, the analysis gets a little trickier, for a lot of reasons. The problem is, we've entered into a period of time, first described by philosopher Hannah Arendt, during which everything is possible but nothing is true. That is, the amount of information people are presented with every day is so great that it can't all be digested. Because of this, it becomes impossible to verify one way or another the truth of a certain statement, as there may be some vital factoid out there that you didn't read but would decide the matter.
Of course, that doesn't stop people '” myself included '” from flinging statistics and opinions around. And here are a couple that I like: From a Daniel Gross story on Slate, the numbers show that, using an average transaction price of $29,106, the 625,000 Clunker purchases accounted for about $18.2 billion in retail sales. That's more than six times what the government paid out in rebates. Plus, as Joseph R. Szczesny points out in Time, when you look at the secondary effects of the stimulus, "the net impact of the program was easily north of $25 billion '” if not much higher."
Now, a lot of people also worry there's going to be a huge hangover from the program. That CARS merely influenced buyers who were going to purchase later in the year to move up their purchases to the summer, which will sink sales for the rest of the year.
I'm sure some of this was going on, but let's not forget about the pent-up demand from customers who decided not to buy earlier in the year for fear of the shaky economy. Getting these shoppers to pull the trigger on new cars was a major accomplishment and helped the industry recoup sales it should have had earlier in 2009. According to a recent Kelley Blue Book report, "From the program's official inception in July to late August when Cash for Clunkers ended, a significant percentage of in-market car shoppers said they previously considered buying a used vehicle, but now considered buying new."
That being said, it's a near certainty that auto sales will, in fact, drop now that the program is over. But, as emphasized in a special report on CNNMoney.com, "Much of this decline will be because dealers don't have many cars left to sell and, as a result, prices are high."
That's the kind of problem that's kind of nice to have, because the way to solve it is by increasing production, another positive outcome for the industry.
Finally, let's take a quick peek over at the official list of "most purchased" CARS vehicles. In order from 1 to 10, it goes like this: Toyota Corolla (pictured), Honda Civic, Ford Focus, Toyota Camry, Hyundai Elantra, Toyota Prius, Nissan Versa, Ford Escape FWD, Honda Fit, Honda CR-V AWD.
It's true there's no General Motors product on the list, and I'm surprised the Ford Fusion is missing. But GM is among those OEMs adding jobs and boosting production '” with a focus on 30+ mpg Chevrolet products such the Aveo, Cobalt, HHR, Malibu and Equinox '” and Ford did see a 66 percent year-over-year increase in Fusion sales in July.
In the end, I'll fall back on that comment from Arendt and say it's possible the CARS program was a mistake, but with "facts" like those above, I defy anyone to claim it's true the CARS program was a mistake. And if that doesn't seem to make sense, just keep in mind it's the auto industry we're dealing with here.