Big winners in Cash for Clunkers: Toyota, Honda, and Nissan; Update: Parts business big losers?
posted at 8:48 am on August 27, 2009 by Ed Morrissey
The Obama administration spent three billion dollars subsidizing the destruction of 700,000 vehicles in order to boost car sales. Which auto makers actually benefited from these American tax subsidies? Reuters reports that foreign car manufacturers gained market share, while the two bailed-out American automakers lost significant portions of theirs in the big summer sale. Only Ford managed to hold its own:
Transportation Department figures on the “clunkers” incentive, which offered consumers up to $4,500 when they traded in their older vehicles for more fuel efficient new models, showed on Wednesday that total sales amounted to just under 700,000 with $2.87 billion in rebates. …
According to the figures, Toyota’s “clunkers” market share was 19.4 percent, compared with its year-to-date U.S. share through July of 17 percent. Honda captured 13 percent of the “clunkers” market compared with 11 percent for the first seven months of the year.
Nissan accounted for nearly 9 percent of “clunkers” sales compared with a January-July share of 7 percent. Hyundai was the biggest winner with a 7 percent share compared with 3 percent for the year through July.
Ford’s “clunkers” sales topped 14 percent, compared with a 15 percent share for the year through July. GM reported 17 percent of “clunkers” business compared with 21 percent from January to July. Chrysler’s “clunkers” share was 6.6 percent, compared with 11 percent otherwise.
Ford had the only two American-made vehicles in the top 10 models sold in Cash for Clunkers. Toyota and Honda both had three, while Nissan and Hyundai both had one each. Two of Toyota’s entries were in the top three, the Corolla and the Camry.
Why did GM and Chrysler, both owned in part by the same government that launched C4C, do so poorly? In part, they didn’t have cars to sell. Both GM and Chrysler had curtailed their production during their bankruptcies but had worked to have inventory ready for the new sales year. By launching C4C in the middle of the summer, when most dealers are already cutting prices to move inventory off the lot, the administration practically guaranteed that C4C would leave them on the sidelines. Chrysler had the worst inventory problems, but GM also had serious inventory issues. Ford, which didn’t take the bailout, had continued production and had inventory ready to sell.
Shouldn’t the owner of GM and Chrysler had known this? Didn’t anyone on the Auto Task Force — say, Ron Bloom, the auto czar with no automaking experience — bother to check whether their companies were ready to compete in this program, and whether July was a smart time to launch this even apart from that? This is what happens when government enters the private sector; it makes decisions based on politics rather than sound business sense, and it picks leaders based on cronyism and political payoffs rather than expertise and competence.
Update: Commenter Daft Punk lists the top ten models destroyed in C4C:
- Ford Explorer 4WD
- Ford F150 Pickup 2WD
- Jeep Grand Cherokee 4WD
- Ford Explorer 2WD
- Dodge Caravan/Grand Caravan 2WD
- Jeep Cherokee 4WD
- Chevrolet Blazer 4WD
- Chevrolet C1500 Pickup 2WD
- Ford F150 Pickup 4WD
- Ford Windstar FWD Van
All of these are American models. Now, what happens to the companies that make parts for these cars? Under normal circumstances, people would replace parts as they fail while keeping the cars on the road. Suddenly, the after-market parts industry has 700,000 fewer cars for maintenance. And since Americans mainly traded American cars for foreign vehicles, that parts market will not bounce back for years.