Car Industry, Post-clunkers
Like a long-lost love, the federal government’s CARS 2009 program is a distant memory. The vague good feeling that its mention engenders is now mixed with the pain of loss … at least if you’re a car dealer. Because in this post-CARS 2009 culture, now that the roads are largely clunker-free, the auto industry has settled into the same dreary morass that it was in pre-clunkers times.
Was the program a success or a failure? Well, of course, that depends on the point of view of the one you ask. Car industry types generally love it; citizens who saw their tax dollars funding other people’s vehicle purchases probably feel differently.
But one thing that is abundantly clear in retrospect is that the program provided consumers with a compelling reason to buy, and more important, to buy now. When all is said and done, the CARS program provided the immediate impetus for something like three-quarters of a million new-vehicle sales. It jump-started new-vehicle sales at a time of desperate need. It accomplished that with the aid of two compelling reasons for consumers to get off their couches and buy a car: substantial cash and a looming deadline. Sales spiked in August -- almost entirely the result of an unprecedented $3 billion, taxpayer-funded incentive program.
So when you try to gauge success, if the goal of the CARS 2009 program was to stimulate new-vehicle sales in the short term, it certainly did that. And if another goal was to get older, less-fuel-efficient vehicles off the road and replace them with brand-new, more-fuel-efficient vehicles, it did that too. But if the key goal of the CARS 2009 program was to give the U.S. auto industry a jump start that would continue after the program ended, it is now abundantly clear that the program didn’t accomplish that.
The first post-clunkers month, September, was a very lackluster month, with sales down in comparison to the cash-for-clunkers month of August 2009 -- which will forever remain an anomaly -- and more important, in comparison to September 2008, which wasn’t all that great either.
While CARS 2009 was a compelling reason to buy in August, once the program was over, consumers put their car-buying plans on hold. Some hoped the unprecedented government support of vehicle sales would spur ongoing momentum, like giving a sled a quick shove to get it sliding downhill. It didn’t happen.
As has been historically the case dating back to the New Deal, government stimulus temporarily makes a difference, but when the government money quits flowing, the economic activity it fosters usually stops abruptly.
In retrospect, for about a month, while the money was flowing, CARS 2009 got American consumers in a car-buying mood again. But to see a real recovery in the automotive sector, consumers will have to be convinced that their jobs are safe, a recovery is in progress and a new vehicle won’t break their personal piggy bank. Doing that is undoubtedly harder than putting $3 billion into a short-term government program.