After spending US$3bn of other people’s money – that of the taxpayers of America – on the CARS, or ‘cash for clunkers’ incentives designed to wheedle people out of ancient, gas-guzzling antiques, it was little wonder the Department of Transportation was bullish over the circa-700,000 sales made through the scheme in barely three weeks.
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Woo-hoo. As the Monday night sales deadline loomed, TV news showed US dealerships jammed with would-be buyers; sales bells tolling every few minutes as another new Focus or Corolla replaced some ancient Windstar, Tempo or Cressida in hectic scenes reminiscent of the trading floor in the 1987 movie Wall Street (remember the Michael Douglas/Gordon Gecko character’s catchline: “Greed is good”?).
But now, as analysts at Edmunds.com noted today, the party is over and the auto industry “likely to experience a painful hangover.” The analysts over there in sunny Santa Monica have looked at their buyers guide traffic and anticipated “a steep decline in sales in the coming weeks based upon a significant drop in ‘purchase intent’ behaviour” of the website visitors.
They ain’t alone. An industry insider with knowledge of production scheduling and labour force planning at a major automaker told us earlier this week the big question, as similar European ‘scrappage’ incentive schemes come to an end, is what happens now? Was all that extra volume really additional business or simply a ‘pull-forward’ of sales that will result in deserted showrooms and idled factory lines in future months?
Certainly, the European schemes have kept automakers in work, as VW noted this week. Yet, in what must be irony of the year, the fact that Toyota’s Corolla was a top-selling ‘cash for clunkers’ incentive model in the US didn’t stop Toyota from yesterday pulling the plug on the NUMMI plant that built most of ’em.
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By GlobalDataAs we reported today, Germany’s scheme has about two weeks of funding to go and Berlin has ruled out an extension. Dealer lobby group, the RMIF, is pleading for an extension of the scheme here in the UK and, as Our Man in Spain reported yesterday, the Spanish automakers want their current Plan 2000E incentive scheme prolonged as well. As you would in a market off about 40% year to date.
So what will happen post-CARS and European countries’ schemes this side of the pond? For the US, Edmunds crunched more numbers, and reported that SAAR roller coaster ride in August did not bode well for September.
Next week’s US sales results – and the view of analysts inside and outside the automakers – will be interesting. For now, the likes of Ford are making hay while the sun shines. Extra small SUV sales means extra shifts on the assembly lines and that’s good news, even if it may turn out to be only temporary.
Enjoy the last weekend of summer (a three-day break for us),
Graeme Roberts
Deputy/News Editor
just-auto.com
