STUDY: Cash for Clunkers helped Japanese way more than Detroit 3
While there is no question that Obama's Cash-for-Clunkers program accelerated vehicle sales this summer, a new report by the University of Michigan's Transportation Research Institute shows the big winners were from Japan, not Detroit.According to the study, nearly 85 percent of the trade-ins were from General Motors, Ford, and Chrysler, yet they only sold 39 percent of the new cars moved off the lots. On the other hand, eight percent of the trade-ins came from Toyota, Honda, and Nissan, manufacturers who accounted for 41 percent of new car purchases.
While these numbers may be justified by the large quantity of inefficient domestic trucks and SUVs that were deemed clunkers, customer loyalty also seems to have taken a big shift. About 68 percent of owners who traded in Toyota, Honda, or Nissan vehicles replaced them with another from one of those Japanese brands, while only 43 percent of consumers who traded in Detroit steel purchased another General Motors, Ford, or Chrysler product. The program cost the U.S. taxpayers about $3 billion.
[Source: USA Today]
Photo by dno1967. Licensed under Creative Commons license 2.0.
Reader Comments (Page 1 of 2)
Ghen 9:07AM (11/16/2009)
What a crappy review of the numbers. It desperately begs the question of how much money from a japanese brand actually makes it to japan. The dealerships, distributors, and manufacturers are all in North America as far as I know and parts always come from far and wide no matter if it's a foreign or domestic car.
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Tim 9:35AM (11/16/2009)
"...how much money from a japanese brand actually makes it to japan."
Answer: Who cares when 100% of the PROFIT goes back to the Japan.
Article: Did "Cash for Clunkers" Cost Taxpayers $24,000 Per Car Sold?
http://www.thenewamerican.com/index.php/economy/sectors-mainmenu-46/2210-did-cash-for-clunkers-cost-taxpayers-24000-per-car-sold
"Apparently, the $24,000 figure caught many by surprise. It shouldn't have. The truth is that consumer incentive programs are always hugely expensive when calculated by incremental sales — always in the tens of thousands of dollars. Cash for Clunkers was no exception.
The White House claims that our analysis was based on car sales on Mars and that on Earth, the marketplace is connected. We agree the marketplace is connected. In fact, that is exactly the basis of our analysis.
That's exactly right. There is no money tree. There is no way for government to create money out of thin air without first taking it from taxpayers. And government is never as efficient as the American consumer."
Progressives Keynesian central planners are IDIOTS who never contemplate the unintended consequences of their radical actions.
What's next, "cash for clunker applances" (made in Korea or China)?
California Cash for Clunker Appliances Plan 2010
http://personalbudgeting.suite101.com/article.cfm/california_cash_for_clunker_appliances_plan_2010
Avro 9:58AM (11/16/2009)
Well said.
Though certain models are imported from Japan, most are manufactured in North America, benefiting the whole infrastructure of manufacturers and dealerships in the US.
Richard 11:43AM (11/16/2009)
Tim, for many years there was no profit, that's why most car companies were "Bailed" out. The truth is that after all your expenses, like parts, labor, distribution, marketing, service and much more, what you have left is profit. In the meantime much money has been spent in the US to produce that very little profit.
DasBoese 11:56AM (11/16/2009)
Actually, the profit goes to the shareholders, which are all over the world.
Just as it does with all the publicly traded "American" or "European" automakers.
nrb 12:38PM (11/16/2009)
Yes, it's great that we're handing over the control of yet another industry to foreign companies. Don't worry because our overlords are assembling and selling some of the products here (for now).
/sarcasm
Ghen 3:27PM (11/16/2009)
nrb: it's actually really difficult to hand over the auto industry to foreign companies for just the reasons listed already. Manufacturing costs if abroad are unfeasible on the low end and just an added cost on the high end autos. Most of the jobs in the automotive industry will always remain in the country because of that fact. The only way I think your paranoid future could come true is if someone invents the star-trek teleporter... And that's a future I'd love to live in anyway.
Nixon 8:45PM (11/16/2009)
Nothing like yet another whiny Cash 4 Clunker blog to bring out the right-wing whine machine.
Tim,
If you want more Toyota/Honda/whoever profits to end up in the US, buy more of their stocks. That way when their profits go up, they end up in YOUR hands - right here in the United States.
Meanwhile, it is US employees building many of these "import" cars -- while many of the so-called "US" cars are being build by folks in Mexico, Canada, or the Pacific Rim.
So get your jingoism under check.
That $24,000 number was a pure political folly that had no basis in actual fact. The reality is that dealer after dealer reported folks saying they had NEVER bought a new car before, much less planned to buy one anyways last summer. The reality is that for each dollar that the US spent on a clunker buyout, that dollar was LEVERAGED by around four dollars from consumers in economic stimulus. This is MUCH better than a tax cut, or even "shovel ready" projects in terms of the amount of economic stimulus bought per dollar of tax dollars spent.
Tax cuts won't do a darn thing to stimulate the economy, because if you haven't noticed, people aren't spending their tax cuts. Regular folks are using their money to pay off debts and to increase savings. Rich people are using their money to buy up gold, and they are staying out of creating new businesses. Keeping more of their own money means more of the same. Very little of any money the Gov't would spend on tax cuts would actually be put back into the economy, and it can't stimulate a darn thing if people don't spend it. So every dollar spent on tax cuts to stimulate the economy buys the Gov't a tiny fraction of a dollar in actual stimulus.
Every dollar of "shovel ready" projects can at best put only one dollar directly back into the economy. Because each dollar can only buy one dollar's worth of bridge building, or road work, etc. Any secondary impact is limited by that dollar-for-dollar worth of economic stimulation that the Gov't gets for their stimulus dollars.
On the other hand, when the Gov't pays $4,000 towards a $28,000 Prius, the Gov't buys SEVEN DOLLARS worth of economic stimulus for every dollar it spends. This is why this program was so successful as a short term stimulus. The 3 billion spent on C4C stimulus had a direct stimulus effect of billions and billions more than the gov't actually spent. If the average new car price, plus any tax&license was only $16,000 dollars, that would mean that 3 billion dollars of Gov't spending bought 12 billion dollars worth of DIRECT economic stimulus. The higher the average, the more the gov't leveraged their economic stimulus dollars. That doesn't even count the amount of new car and used car purchases that were triggered when folks went in and bought cars anyways, even though they didn't qualify for a C4C deal. The Gov't didn't have to put a single penny into these deals, but C4C was what got these folks into the dealerships.
(secondary stimulus would be in proportion to direct stimulus for each method)
Cash for clunkers was a massive success. And it just pisses off folks who claim the gov't can't do anything right, that it was such a massive success.
Satn 9:40AM (11/16/2009)
Maybe because buyers got what was the best car from their experience?
It was a $4k rebate on giving up an old car, not getting a new car for free, people still did test drives and had hard decisions to make.
Most domestic compacts are crap, cheap crap, but crap.
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wincros 11:25AM (11/16/2009)
When I first discovered that the cash for clunker plan did not require a domestic purchase I was disappointed. After some thought I realized that it is hard to tell what a domestic car is. Cars made by Ford, GM and Chrysler all have had substantial foreign content for decades. For years the Lincoln had more foreign content than domestic so Ford could tell the government that it was imported and would not lower their CAFE standard under the rules at the time. I don't know its current status. The foreign owned factories all use domestic content over and above the assembly with some Toyota and Honda models exceeding 80 percent US made stuff. Requiring a "domestic" car purchase would have just generated lawsuits that would have caused the plan to fail.
So if you take domestic content into account you could make the exact opposite argument to the article. And how the hxxx can you call a customer disloyal when he/she buys a Toyota Sienna with 85 percent domestic content instead of a Ford 500 with 80 percent domestic content?
http://www.boston.com/cars/news/articles/2006/09/24/made_in_america_hard_to_tell/
It is interesting that what the fringe like to call the left wing media keep trying to find new ways to define this successful program as a failure. GM says it has stabilized and has substantially reduced its losses and will begin repayment of government loans 5 years early with a 1 billion dollar payment next month. Ford made its first profit in several years. So the stimulus part of it seems to have worked, although you could argue that it should have lasted longer. There is no question that the primary purpose of replacing high fuel consumption, polluting cars off the road and replacing them with something better has worked just fine even though shallow tabloid rags like USA Today have taken their "not good enough" potshots at it.
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Ghen 12:03PM (11/16/2009)
Hear hear. C4C was the absolute most successful "bailout" program of the past few years based on $$ spent.
Matt 2:02PM (11/16/2009)
Yeah, Ghen, if you look at success based on $$ spent Barack Obama is the most successful president EVER! WOO! Now where did I put that deficit calculator....
..oh, here it is:
http://3.bp.blogspot.com/_7yw5euhvsP4/SjHIaXtuvBI/AAAAAAAAAAU/ZrKy1ZOa0ME/s1600-h/Deficits.jpg
Discussion:
http://boghieonyoursix.blogspot.com/2009/06/that-pesky-obama-deficit-chart-thany.html
Ghen 3:32PM (11/16/2009)
Matt: The 3 billion spent on C4C is pure pocket change compared to the other bailouts that contribute to the national debt. Add to that the fact with C4C we actually have a chance of getting that money back in taxes, insurance, and an overall better economy whereas the bailout of AIG at $173 billion is a complete throwaway.
I won't bother arguing the national debt issue because I agree that we're in a horrible position. Thing is, the Bush policies were crap at reducing debt even in a good economy so the grass isn't any greener on the other side!
Blown tranny 2:38PM (11/16/2009)
Matt, the bulk of the current federal deficit was inherited from Bush. Tarp was passed by Bush but didn't show up on the books until Obama was president. Likewise, the recession started during Bush but the large reduction in tax revenues didn't affect the deficit until Obama took over.
http://www.capitalgainsandgames.com/blog/stan-collender/1167/2009-deficit-im-telling-you-last-time
"the CBO numbers show that almost all of the $1 trillion increase in the deficit from 2008 to 2009 would have happened regardless of who was elected president last November"
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Ghen 3:34PM (11/16/2009)
Your user name is very provocative ;)
Tim 4:03PM (11/16/2009)
Last fiscal year, the deficit was $459 billion. For this fiscal year, it was $569 billion when Mr. Obama took office. Under his proposals, another $1.276 trillion will be added to the deficit this year, for a total of $1.845 trillion.http://noblesseoblige.org/wordpress/2009/03/26/bush-deficit-vs-obama-deficit/
The CBO says deficits will fall for three years to $658 billion, still nearly 50% larger than any past deficit. After that, deficits go back up every year, reaching the trillion-dollar a year mark again in nine years. By 2019, the debt would reach 82.4% of GDP, a level not seen since 1947. With astonishing candor, even Peter Orszag, the president’s budget director conceded these levels of deficits and debt are “unsustainable.”
Don't forget that it is CONGRESS who sets the budget. Who has been in charge of Congress for the last 3 years? hint... ahem...PROGRESSIVES!
Blown tranny 4:20PM (11/16/2009)
Tim, you are using a reference that sources information from Karl Rove???
Anyways, you have missed the point. The deficit would be about the same no matter who was president. Almost all the increase comes from reduced tax revenue because of the recession, (began December 2007).
Tim 6:38PM (11/16/2009)
Blown Tyranny,
"The deficit would be about the same no matter who was president."
Yep, there is the Big Gov't NeoCons and the Bigger Gov't Progressives. Both HATE Constitutional limitations on Federal Power and only differ by degrees. We REALLY have a one party system of left and lefter.
"Almost all the increase comes from reduced tax revenue because of the recession."
WHAT? Are you saying that Trillions is bailouts have less to do with our current situtation than reduced revenue? Really?
Read much? "By 2019, the debt would reach 82.4% of GDP, a level not seen since 1947." Politicians are VERY wasteful when they spend other people's money. Don't you remember the $500.00 hammers and $900.00 toilet seats? What about the $Billions in cash that went to Iraq to prop up THEIR gov't then just disapeared? What gov't program is NOT way over budget or going bankrupt? Name ONE!
Ghen 4:43PM (11/17/2009)
the treasury department.
Bill 3:24PM (11/16/2009)
The purchase numbers here are simply reflective of the reasons the formerly-Big Three are in the shape they're in: they're not building the products consumers want. Reasons include both the product designs and the perceived quality of the products.
Example: when shopping for a car for my daughter last year, I wanted to give domestics a chance, so we went to look at a Ford Focus. I guess they've sold a lot of these, but we couldn't see why. We didn't even test drive it. We ended up buying a lightly-used Toyota Matrix instead. Much better interior design and materials, much better fit and finish, much better perceived value for money.
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