The US Senate last night approved and sent to the president for signing into law a US$2bn boost for the CARS ‘cash for clunkers’ sales incentive programme that burned through its initial $1bn allocation in about a week.
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The measure was approved by 60 votes to 37 and president Barack Obama was expected to sign it quickly, Reuters reported.
That initial $1b of funding approved in June generated over $920m in rebates and over 220,000 auto sales.
The program offers new car buyers a taxpayer funded, government backed rebate of up to $4,500 if they trade in old vehicles for new, more fuel efficient ones. Some automakers have added top-up incentives of their own or offered similar deals to buyers who don’t qualify for the federal scheme.
As promised earlier last evening, supporters of the extension defeated several Republican amendments aimed at derailing the plan in the Senate.
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By GlobalDataRichard Shelby, the top Republican on the Senate Banking Committee, told Reuters the programme “has squeezed months of normal activity” into a short period of time.
“When the backlog is met, interest in the programme will fade, and the facade of economic benefit will disappear,” Shelby said.
But Obama said in a statement after the Senate vote that the economy “will continue to get a much-needed boost”.
Major automakers said in a letter to senators the current $1bn programme had helped their companies, suppliers, scrap yards, steel producers and other small businesses.
“There is no question that ‘cash for clunkers’ has succeeded,” Dave McCurdy, chief executive of the Alliance of Automobile Manufacturers told the news agency.
The House of Representatives had passed the $2bn extension on 31 July.
Democrat Senator Debbie Stabenow of Michigan told Bloomberg Television hours ahead of the vote the $2bn would “probably be the last infusion of dollars”, and said the incentive scheme had been “incredibly successful”.
Bailey Wood, director of legislative affairs for the National Automobile Dealers Association, told Reuters future demand was an open question but said showroom traffic remained strong and non ‘clunker’ sales were also up.
Barclays Capital analyst Brian Johnson said he expected the ‘clunker’-related lift to the industry’s annual sales rate and production in the second half of this year to continue.
Economists saw the CARS programme boosting third quarter growth while several firms, including Goldman Sachs, had recently raised their GDP forecasts, Reuters noted.
