Sun, Jun 21, 2009 page11

• ‘Cash for clunkers’ measure could spark US auto sales

  • AFP
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  A so-called “cash for clunkers” measure approved by the US Congress could help reignite sluggish auto sales, although the overall impact may be modest, analysts and industry officials said.

  The measure was included in a spending bill approved this week, providing US$1 billion to stimulate the struggling auto industry, paying car buyers cash if they trade in their old gasoline-guzzling cars for fuel-efficient models.

  The plan is modeled on programs in Europe, which have had some success in sparking sales of new autos.

  The program “is an important step forward for America,” Transportation Secretary Ray LaHood said. “It provides incentives for consumers to buy new, more fuel-efficient cars and trucks, providing a boost to the auto industry and protecting jobs, while limiting fuel use and greenhouse gas emissions.”

  The Automotive Trade Policy Council — an association that includes Chrysler, Ford and General Motors — welcomed the measure, expected to be signed into law by US President Barack Obama.

  “We believe the ‘cash for clunkers’ legislation is a big win for consumers who will be offered a helping hand from the government to trade in older cars and trucks for newer, technologically advanced and more fuel efficient models,” council president Stephen Collins said. “This action will also help to stabilize the auto industry here in the United States and give a healthy boost to the national economy during a very tough time. Similar programs around the world have been very successful and we expect the same results here.”

  John McEleney, chairman of the National Automobile Dealers Association, hailed the measure, saying it “will boost consumer confidence, get the economy going again and reduce our dependence on foreign oil.”

  The bill will provide up to US$4,500 in incentives to consumers who trade in certain fuel-hungry vehicles for autos that consume less fuel.

  Edmunds.com, an automotive research firm, estimates that the measure will spark relatively modest sales — probably less than the 250,000 estimated — and would only provide an incentive for a small number of car owners whose vehicles are worth less than US$4,500.

  “Most qualifying ‘clunkers’ are at least 10 years old. Their owners are either not looking for an increased car payment or cannot afford to purchase a new vehicle, which averages nearly US$30,000,” an Edmunds.com report said.

  The requirement that consumers own the vehicle for at least one year will also limit the impact, according to the group, which argued that a looser allowance “would ignite a wave of economic activity” by stimulating purchases and resales of clunkers for the allowance.

  “In the end, this is a non-event. Even 250,000 new vehicles sales will not provide the impact needed for an industry looking for at least 5 million in additional sales,” said Jeremy Anwyl, chief executive of Edmunds.com.

  The vehicle traded in must have a fuel economy rating of 18 miles per gallon (7.7km per liter) and be in drivable condition. The new car must offer at least 22 miles per gallon.
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