President Obama recently signed an extension to the Car Allowance Rebate System (Cash for Clunkers) that provides an additional $2 billion for the program. The original $1 billion allotted for the program ran out within a month.
This is great news for dealers who had a backlog of applications.
But is it good for the environment?
The Cash for Clunkers program has been touted as an environmental program that also provides an economic stimulus for automobile manufacturers. Basically, let’s help out the environment by getting old gas-guzzlers off the road and in turn it will fuel car sales.
But I think we need to look at this program for what it is:
It’s a stimulus for the automobile manufacturers.
That’s it. The environmental part of it just makes the government spending part (now $3 billion worth) an easier pill to swallow. Who wants another $3 billion in spending which may well translate to more taxes? But with an environmental slant we feel a little better about it. Well, some people do.
Let’s face it, auto manufacturers and dealers have been hurting. Sales are down, dealerships are closing, and manufacturing plants have shut down. The Treasury now owns parts of Chrysler and GM after they both declared bankruptcy (conflict of interest perhaps?). The administration needs the auto companies to do well so that their bailout doesn’t look like a failure.
And this is why it’s not an environmental program.
Were the environment a primary concern then gas mileage requirements would have been higher. Many foreign auto companies already have high mileage cars but the US manufacturers have lagged behind in created high mileage cars so a high MPG rating would tilt the favor of an environmental program away from the US. We can’t go and create programs that hurt the companies we own, can we?
Reduce, Reuse, Recycle. Well, we have the reduce part. But reuse and recycle are thrown out with the fact that the clunkers are supposed to be destroyed when they are traded in.
Or the money could be spent elsewhere. Three billion is a lot of money that could be committed to other environmental programs that could have bigger impacts long-term. How far would $3 billion go for research into alternative fuels or climate control?
Some have even questioned whether CARS is a good program for consumers, no less for the environment. With the economy hurting and unemployment the highest in over a decade should the government be giving incentives to buyers to go out and spend on new cars? For some there may be great deals out there but I fear there will be some who look at this as an excuse to buy something new that they don’t need or can’t afford.
The program is working as a stimulus. I’ve heard that Chrysler is running out of inventory. Some companies who average 60-90 days with their inventory are down to about 20 days. Cars are flying out of the dealerships.
But a big concern has to be what will happen once the program finally runs out of money. If the auto makers are smart then they will use this momentum to push up production of more fuel efficient vehicles. Reports from GM are stating that their new VOLT will get over 225 MPG! Build reliable cars with great mileage and we won’t have to worry about stimulating the US car business. The government got momentum moving for car sales but it’s up to the manufacturers to keep it going.
So is the Car Allowance Rebate System a success? I would say it is so far. But as an economic stimulus not as an environmental program.
What do you think?
photo credit: davetrainer
{ 17 comments… read them below or add one }
Almost. The Volt has a lot of expensive technology that needs to be homologated over a wide production to make it’s $30-40k price profitable. There simply isn’t enough demand for vehicles like this (with that price) to hold up a large company like GM and its suppliers. It’s not that simple.
One thing is for sure, though. The only environmental thing about CARS is it creates demand for more fuel-efficient vehicles, even while gas is still cheap.
If GM didn’t abandon the EV then they might already have the demand and price point in place. But they let Toyota get the leg up in the market.
Yes, there is more demand for fuel efficient vehicles the requirements for the credit aren’t stringent enough to really be considered environmental.
Perhaps. GM’s definitely had some learning opportunities along the way. Toyota’s Tundras and Lexus GX’s are far from green and innocent, though.
True, but at least they took a shot at innovation. And it’s paid off for them.
I think it has been a success in terms of stimulus. However, I’m more dubious on the environmental impacts. But, if it is getting people to go out and buy fuel efficient cars, and that in turn prompts U.S. automakers to improve their products (foreign companies have shown us it’s possible), then I guess that’s a sort-of win. Unfortunately, until we use our resources to develop our technology and take advantage of the innovation we have here to develop more alternative energy for more than just cars, most of what we’re seeing will just be very small steps. But small steps are better than no steps…
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I guess it starts with baby steps but we’re the US and we’re capable of giant steps. At least we used to be.
I feel the same way, but something — the collective will, I think — to make those giant steps has faded.
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Cough! Oil companies, Cough! Sorry, frog in my throat.
You’re right that this really is just a stimulus/subsidy/bail-out for the auto manufacturers. It only makes sense that the government would want to do something to increase the value of their shares in the new GM, except that the most popular cars being purchased through the program are not GM products.
Toyota and Honda still have more popular fuel efficient cars for sure. But it is making the US makers re-think their lines.
I would be interested to see the breakdown of how has benefited more from this program, foreign or domestic automakers. My initial assumption would be that the foreign automakers have received a higher percentage of the profit on this deal.
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I believe the Toyota Corrolla is the most popular car traded for right now.
One of the other things the government has done, is encourage greater debt by the consumer for an item that devalues and continues to eat up cash over it’s life.
The other thing that continues to nag me is the idea of electric cars/hybrids and what happens to those batteries which are deemed toxic waste? As the supply of them increases what will be the impact upon the environment verses the impact of a combustible engine?
That’s an interesting point! We haven’t had these cars around long enough to see what happens when tons of hybrid batteries start dying and need to be destroyed. Better MPG is great but at what cost log-term?
As far as the environments go, I wouldn’t imagine the impact to be too significant from this program. Either way, there are junk cars produced every day, and if you look at the auto sales before the market crash, it’s still higher than the sales companies are getting from this clunker program.
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I think the environmental impact is huge. Most used cars can be re-sold these can’t. Also, many people depend on being able to purchase used cars, they can’t afford or no better than buying a brand new one. Millions of good used cars are instead being put out to pasture. What they should have done was allowed the used cars to be sold for no more than the rebate plus some processing fee for the dealer. The funds from the sales could have been used to drastically reduce the cost of the program. I guess it is always easier to call the plays from the easy chair. :O)
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That’s a really good point about resell. I hadn’t even thought about that. Replacing parts, like the batteries, could be very cost prohibitive in order to make ready for resell. Thus making it pointless.
I hadn’t considered that.
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