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Economy
Cash-for-clunkers boost Japanese car sales
2009-08-18
Oops.
The US's cash-for-clunkers scheme, designed to bolster Detroit's embattled carmakers, is turning out to be an even bigger boon for their Japanese rivals. According to data published by the National Highway Traffic Safety Administration on Monday, Americans are using the scrappage incentives to buy more vehicles from Toyota than any of the three Detroit carmakers.

Toyota has an 18.9 per cent share of vehicles bought so far, putting it ahead of General Motors with 17.6 per cent and Ford with 15.4 per cent. Chrysler is in fifth place, after Honda.

GM had a 19.6 per cent share of the overall US light-vehicle market in the first seven months of this year, compared with Toyota's 16.3 per cent, according to Autodata, a New Jersey-based market research firm. The top models bought since the scheme began on July 24 are the Toyota Corolla, Honda Civic and Ford Focus, all small sedans. Three of the top five are Toyotas.

The popularity of smaller models underlines the price paid by the Detroit companies for their strategy to all but cede the passenger car market to their foreign rivals during the 1990s as they concentrated on bigger and more profitable sport-utility vehicles, pick-up trucks and minivans.

All ten of the most traded-in clunkers are Detroit-made vehicles in these three segments.

GM and Chrysler are battling to regain market share following their court-supervised restructurings earlier this month. Furthermore, they have struggled to keep dealers stocked with the usual variety of models and options, having shut down much of their North American operations during their journeys through bankruptcy protection.

Credit Suisse estimates that Chrysler's car inventories tumbled to 34 days supply at the end of July from 60 a month earlier. Its small Dodge Caliber is virtually sold out. A stock of 55-60 days supply is considered normal.

Under the cash-for-clunkers scheme, modeled on similar incentives in Europe, buyers who trade in old vehicles for those with lower fuel consumption receive a rebate of $3,500 or $4,500, depending on the fuel consumption of the replacement vehicle. Congress initially earmarked $1bn for the incentives, but rushed to add another $2bn within a fortnight of the scheme's introduction.

Analysts expect that the funds will last until early September, supporting the purchase of 700-750,000 new vehicles.
At which point sales will go down the toilet after all the low-hanging fruit has been picked. But that won't happen for quite a while yet.
Toyota and its Asian rivals have sought to allay some politicians' concern at the benefits they are reaping from the scheme by noting that a sizeable chunk of their vehicles are built in North America.
Posted by:gorb

#24  And concerning energy efficiency, burning down larger older homes would save a great deal more energy.

Reminds me of that Pratchett quote,

"Teach a man to make fire, and he's warm for a day. Set him on fire, and he's warm for the rest of his life."
Posted by: Thing From Snowy Mountain   2009-08-18 19:47  

#23  Hey Anguper, too bad your sister fixed her car - I could have used the parts for my 1995. Great little cars - Corollas disguised as Chevys. And not eligible for C4C. Too bad - I could use a subsidized new car, since my two are both 1995 and total 300,000 miles, but neither gets bad mileage (38 & 23 highway mpg) - and 500 miles per quart of oil, but that doesn' count.
Posted by: Glenmore   2009-08-18 19:04  

#22  Then older cars require more maintenance using US parts and labor. So the 30% reduction in US demand is more like 50%.

Brilliant, a stimulus program that reduces demand by billions of dollars.
Posted by: phil_b   2009-08-18 18:07  

#21  You increase the demand for cars by decreasing the demand for other goods/services by an equal amount, Except to the extent the program is funded by printing money.

Which means this is a subsidy to inefficient unionized workers.

And then the majority of these cars are imported. Whereas overall only 20% of goods/services in the US economy are imported. So in fact the program reduces overall demand in the US economy by about 30% of the amount of money spent on it.

And concerning energy efficiency, burning down larger older homes would save a great deal more energy.
Posted by: phil_b   2009-08-18 17:58  

#20  pardon, i meant poor gas mileage, not low gas mileage
Posted by: liberal hawk   2009-08-18 17:43  

#19  "By the same logic, you could solve the mortgage crisis by burning down houses."

You haven't spent much time at RE websites, have you? The "bulldoze em all" approach is not a novelty there. In general though, IIUC, the least economically viable houses, the smaller houses on the suburban edge, are not nearly as "energy inefficient" as big macmansions (at least focusing only on heating/AC etc rather than transportation) and there really isnt a standard "energy usage per person" rating for houses like there is MPG for cars, so it would be harder to make an enviro case.

Posted by: liberal hawk   2009-08-18 17:43  

#18  Also, why scrap working cars?

A. By taking cars off the market, you create more demand (ultimately) for new cars.

B. The cars have low gas mileage, and so are presumably contributors to global warming, world terrorism, etc.

There are of course critiques of the enviro benefits - it takes energy (and therefore GHG's) to BUILD new cars, and so from a purely GHG point of view it would probably be better to just let them die on their own. But who is willing to say building new cars is a bad thing right now?

Basically its a stimulus plan, targeted at the auto industry, with an enviro side benefit. Pretty much what anguper said.
Posted by: liberal hawk   2009-08-18 17:38  

#17  By the same logic, you could solve the mortgage crisis by burning down houses.
Posted by: phil_b   2009-08-18 17:18  

#16  Hell, my Chevy Aveo was made in Korea. Country of ownership has precious little to do with country of manufacture these days. Most of these traded-in cars will have been made out-of-country IIRC.
Posted by: Mitch H.   2009-08-18 16:31  

#15  Thanks for the CARS link. Now to do some research.
Posted by: mom   2009-08-18 16:29  

#14  Great Moments in Industrial Policy #214
Posted by: Mike   2009-08-18 16:05  

#13  Let me guess....Acute Cellphonicrashin the culprit? She swears not, said she was barely moving (as was the other driver) when they came together. No one's airbags even went off.
Posted by: Anguper Hupomosing9418   2009-08-18 14:09  

#12  Last week my sister totaled her 1996 Geo Prizm (for the 2nd time)

Let me guess....Acute Cellphonicrashin the culprit?
Posted by: Besoeker   2009-08-18 13:07  

#11  Missed something, LH: Where does one find out what cars are eligible and which aren't? Check out CARS DOT GOV for all the details. Too much has been made of C4C. It was intended as a short term boost to the auto industry, which is on the ropes (if anyone has failed to notice). There are only a few potential buyers (like me) with the exact kinds of 'clunkers' and the cash/credit available NOW to buy/take-out-a-loan-on a new vehicle. The 250,000 or so 'clunkers' which will be rendered undriveable just aren't that many in a country with 250 MILLION registered passenger vehicles (give or take a few million) on the road. Last week my sister totaled her 1996 Geo Prizm (for the 2nd time) and put $1,200 into fixing it up again. It was her best option for a decent set of wheels.
Posted by: Anguper Hupomosing9418   2009-08-18 12:37  

#10  Not to mention that those 'clunkers' might be used by those POOR who can't afford even a used car so they can go out and work and get off from welfare....

Oh... wait... that would mean they get off the DNC Plantation... can't have that.
Posted by: CrazyFool   2009-08-18 12:14  

#9  Also, why scrap working cars?
Posted by mom

Because Barry wills it. He needs a "win" even if he has to buy it in $4000. delayed payment installments. Now, no more from you! SILENCE!
Posted by: Besoeker   2009-08-18 12:12  

#8  Missed something, LH: Where does one find out what cars are eligible and which aren't? You say a certain 95 model isn't eligible. Is it the age of the car? the mileage? What makes the car ineligible?

Also, why scrap working cars?
Posted by: mom   2009-08-18 12:06  

#7  Liberal Hawk: This neighborhood was originally built for the military, when the local airport also had a Strategic Air Command base. This is noncom and commissioned officers' housing. The commissioned officers got single family homes. The noncoms got places like ours; half-duplexes with small but adequate rooms; and who needs closet space when you have a duffel bag?

It has been a haven for first time home buyers who buy cheap so they can either afford to have one parent stay home with the kids (like us) or save up for something better. The county bought 30 units when the military closed the base. Due to the weirdnesses of the housing market in this area, the rents have gone up appallingly. Our mortgage is $400 a month less than my Section 8 neighbor's rent for the same size property!

Neighbor A traded in their car when it was ready to disintegrate. The dealer fixed it up, and lo and behold, neighbor B, the section 8 neighbor described above, got three more years out of it. When the van finally died, neighbor B's teenager bought a working heap out of his own earnings. He takes the younger kids to school and his mom to work, and lets his mom use it for doctors appointments and other errands.

So this is why I am so ticked with the politicians for taking good heaps out of the market.
Posted by: mom   2009-08-18 12:01  

#6  Do they mention the 'Detroit' cars made in Mexico or Canada? /rhetorical question

As an aside, Toyota ALSO has plants in Mexico and Canada, as well as in the US
Posted by: liberal hawk   2009-08-18 10:28  

#5  Personally, I would ask, if the program is so totally oversubscribed at $4,500, instead of refunding it at that amount, why not reduce the offer to, say, $3,000. You will probably STILL get loads of takers, and at less expense.
Posted by: liberal hawk   2009-08-18 10:25  

#4  "everybody else is a first time home buyer on a tight budget"

One has to question whether buying a new home, makes sense for someone who can't afford even a semi - late model used car.

Its not like the cash for clunkers program is taking ALL older used cars off the market - a '95 Accord, for example, isnt eligible. they are not exactly selling for their weight in gold.
Posted by: liberal hawk   2009-08-18 10:23  

#3  In my neighborhood, NOBODY buys new cars. 20% of my neighbors are Section 8 renters; everybody else is a first time home buyer on a tight budget. So what will my neighbors drive when their current heaps fall apart?

Politicians smoking hopium again.
Posted by: mom   2009-08-18 10:10  

#2  Another second order effect not being discussed is the number of serviceable cars being taken out of the used car market. The smashing of the clunkers forces higher prices for available used cars. These are vehicles which less affluent people could buy and use to get to work....that is, if there is any work to be had.
Posted by: Besoeker   2009-08-18 07:54  

#1  Toyota and its Asian rivals have sought to allay some politicians' concern at the benefits they are reaping from the scheme by noting that a sizeable chunk of their vehicles are built in North America.

Tucked in at the end. Do they mention the 'Detroit' cars made in Mexico or Canada? /rhetorical question
Posted by: Procopius2k   2009-08-18 07:39  

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