Tuesday, September 1, 2009

Cash for Clunkers Recharges US Auto Sales; Does Hangover Await?

Automakers received a boost in August sales fueled by the Cash for Clunkers program. Hyundai (+47%) and Ford (+17%) led the pack, while GM stalled out with a decline of 20%. The net impact of the program was to accelerate future demand into the current quarter, while increasing consumer debt. No question this was a sweet deal for those looking to purchase a car, but how detrimental will this be to sales in succeeding quarters?

For the $3B of taxpayer money spent on this program, the year over year sales comparisons are:

Hyundai: +47%
Ford: +17%
Honda: +10%
Toyota: +6%
Chrysler: -15%
GM: -20%

Interestingly enough, the two largely government owned enterprises performed the worst.

Now let's watch some perfectly good vehicles being destroyed:

Chevy Truck



Painful to watch, isn't it? I don't think this is what Schumpeter meant by "creative destruction."

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