The US government said it will suspend its popular “Cash for Clunkers” auto rebates on Monday as the program’s US$3 billion budget runs dry, a month after it was launched.
The program, offering payments of up to US$4,500 to people who trade in old gas guzzlers for new, fuel-efficient vehicles, will end at 8pm on Monday, by which time all applications for the rebates must be submitted to Washington.
It has provided a big temporary boost for the deeply troubled auto industry and the battered US economy. In the past few weeks both Ford Motor Co and General Motors Co have increased production, as some models have been in short supply.
PHOTO: AFP
However, the temporary nature of the program is likely to raise concerns that it may have only brought sales forward from future months, and sales could plunge again.
“We’ve seen an overwhelming and overnight success and so much so that we’ve reached the point where we need to wind this program down,” an administration official said on Thursday.
“The goal of the wind-down is to provide a soft landing for dealers and consumers and ensure the program ends in a successful way,” the official, who asked not to be named, told reporters during a background briefing.
The announcement comes a day after a group representing some 20,000 new car dealers in the US warned that dealers who accept additional sales under the program face a growing risk that they may not be paid back the rebates they have already given customers.
Dealers have complained of difficulty running businesses while awaiting government checks under the program.
As of Thursday, auto dealers had submitted claims to Washington for nearly 457,500 vouchers totaling US$1.9 billion, of which just under 40 percent of the applications have been reviewed, the Department of Transportation said.
The government has paid about US$145 million to dealers.
General Motors said on Thursday sales in the past two months had exceeded its internal forecast by more than 60,000 vehicles, largely driven by the “clunkers” program.
The automaker said it intended to provide advances for qualifying new vehicle sales already transacted under the rebate program and would provide advances as long as the program was in effect.
US retail vehicle sales this month are projected to exceed 1 million units for the first time in the past 12 months, boosted by the rebates, auto industry forecasting firm J.D. Power & Associates said on Thursday.
Combined with sales to fleet customers, such as rental companies and government agencies, total light vehicle sales are expected to come in at 1.1 million units this month, down 8 percent from a year earlier, J.D. Power said.
“Improved consumer confidence and credit availability during the past six months have combined with the [rebates] program to lift industry sales out of their slumping year-to-date levels, which have been down approximately 35 percent year over year,” said Gary Dilts, senior vice president at J.D. Power.
On a seasonally adjusted basis, widely tracked by analysts, US auto sales this month could be as high as 12.2 million units, up from 11 million units last month and the highest this year, the agency said.
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