You know who else is probably benefiting from the program? Small businesses and the auto loan financial sector. You know who is mollified by the program? UAW workers and US auto manufacturers.
Small businesses would join the US everyman in taking advantage of what could effectively work like a free down payment. And most of the individuals or businesses taking advantage of the program will be helping an auto loan sector that has been on the decline for a few quarters.
The auto workers unions made some self sacrificing deals lately, partially at the urging of Democrats I'd bet. By injecting a sales surge into their industry, they are looking at much improved odds of staying employed. That should make their cooperation feel justified. And don't forget that even though many of the top selling vehicles involved in this initiative are not US owned companies, they are still manufactured in US based factories. So those inclined to "buy American" should be somewhat mollified.
The Big Three have been struggling lately. While they are fighting for survival, they have been required to accommodate higher CAFE standards. Their legions of lobbyist could pester Congress like so: "How can you ask us to spend on refitting our manufacturing toward higher fuel efficiencies while we have to come begging for help just to survive?" But with this program, the consumer demand has shifted towards higher fuel efficiencies. And the car industry will always find ways to financially justify capital investment to accommodate consumer demand. Their own survival and government pressures are now pushing them in the same direction.
Similarly, the US consumer should feel better. The environmentalists often ask for noble sacrifice without considering the financial hardships that may result. "Everyone should just drive more efficient cars." This gives the movement an elitist feel since it is mostly the comfortable that can trade money away for improving the world. So Cash for Clunkers removes the initial financial sting. And, lo and behold, we find that a lot of consumers would like to choose the more sustainable option all things being equal.
Many might find that they would have saved an amount equal to the rebate in gas savings over a few years. So the program might also have a practical educational effect. And we will see consumers preferring efficiency without consciously signing on to a political Green movement.
For a much more informed discussion on these notions, take a listen to Amory Lovins' lectures at Stanford in '07. His description of a 'Fee-Bate' program is quite similar to Cash for Clunkers. And his attention to detail is such that he might point out the city street repair departments could be added to the list of beneficiaries of the program; with lighter average vehicle weights come less road damage.
EcoGeekDan
Showing posts with label Cash for Clunkers. Show all posts
Showing posts with label Cash for Clunkers. Show all posts
Friday, August 7, 2009
Tuesday, August 4, 2009
Cash For Clunkers, Day 11 (or 34?)
Update: The House has approved another $2,000,000 in funding for the program, but the Senate must approved as well, and before the recess starts on Friday. The margin of approval in the House indicates a popularity too great for the Senate to fight, so they seem likely to approve.
Besides the Unemployment extensions, this seems to be the first bailout program that directly benefits the average family. Other bailout money has gone to banks, car manufacturers, and government contractors, all a bit outside the mainstream. In a mostly consumer economy, helping the mainstream consumers will be the most effective stimulus.
KQED's Forum just had a show on the subject. The Harvard economics professor seemed only concerned about the debt the US was incurring for this stimulus program, but not for any of the other programs. Cash for Clunkers has used a billion, is waiting for the approval of two more, and even if there is another extension, it is likely to be less than for 10 total. Haven't the other bailouts been in the range of tens or even hundreds of billions? And that professor wants to gainsay even a small step towards equality?
His main plea was for a gas tax. I often wonder about people who appeal for such highly unpopular and unlikely strategies. Are they really hoping nothing will change, like Bush Jr. and his hydrogen research?
In any case, I sure will not miss those SUVs and trucks that are mostly being replaced by regular cars. We should all watch for changes in auto fatalities in the next year, along with reductions in the US trade deficit stemming from reduced oil demand.
In fact, we should recommend our congressmen offer a second round of the program: if the economy continues to flounder, we will help the average family while saving oil; and if the economy picks up, the qualifications can require greater mileage improvements. Removing these gas guzzlers from the roads will go a long way towards energy independence. And don't forget that the rest of the world will see that the US has finally gotten off its good intentions and done something measurable. We might go into the next round of climate talks with a lot more clout & credibility.
I personally think that this sustainability program is one of the best for how it mixes public and private sector benefits. It will be a frequently cited example of efforts that improve both the environment and the economy.
EcoGeekDan
Besides the Unemployment extensions, this seems to be the first bailout program that directly benefits the average family. Other bailout money has gone to banks, car manufacturers, and government contractors, all a bit outside the mainstream. In a mostly consumer economy, helping the mainstream consumers will be the most effective stimulus.
KQED's Forum just had a show on the subject. The Harvard economics professor seemed only concerned about the debt the US was incurring for this stimulus program, but not for any of the other programs. Cash for Clunkers has used a billion, is waiting for the approval of two more, and even if there is another extension, it is likely to be less than for 10 total. Haven't the other bailouts been in the range of tens or even hundreds of billions? And that professor wants to gainsay even a small step towards equality?
His main plea was for a gas tax. I often wonder about people who appeal for such highly unpopular and unlikely strategies. Are they really hoping nothing will change, like Bush Jr. and his hydrogen research?
In any case, I sure will not miss those SUVs and trucks that are mostly being replaced by regular cars. We should all watch for changes in auto fatalities in the next year, along with reductions in the US trade deficit stemming from reduced oil demand.
In fact, we should recommend our congressmen offer a second round of the program: if the economy continues to flounder, we will help the average family while saving oil; and if the economy picks up, the qualifications can require greater mileage improvements. Removing these gas guzzlers from the roads will go a long way towards energy independence. And don't forget that the rest of the world will see that the US has finally gotten off its good intentions and done something measurable. We might go into the next round of climate talks with a lot more clout & credibility.
I personally think that this sustainability program is one of the best for how it mixes public and private sector benefits. It will be a frequently cited example of efforts that improve both the environment and the economy.
EcoGeekDan
Friday, July 31, 2009
Cash for Clunkers Effects, part II
7/31/09 - 10:51 pm
Ok, I'm having a tough time getting at the market results for the specific sectors I mentioned in my prior post. But it looks like Chevron and Ford are up today, while maybe steel is down. It may be that I need to expand the time scale for my predictions.
I am now thinking that at the end of the program, steel will have declined some, the car companies will have risen, and oil is just too heavily speculated upon for me to predict.
EcoGeekDan
Ok, I'm having a tough time getting at the market results for the specific sectors I mentioned in my prior post. But it looks like Chevron and Ford are up today, while maybe steel is down. It may be that I need to expand the time scale for my predictions.
I am now thinking that at the end of the program, steel will have declined some, the car companies will have risen, and oil is just too heavily speculated upon for me to predict.
EcoGeekDan
Cash for Clunkers Effects
7/31/09 1:59 am - I'm predicting that today's markets will open with oil and steel companies declining, while car companies rise.
I just read some news about the Cash for Clunkers federal stimulus program running out of money. The $1 billion of funding that Congress thought would last until November, or four months after going into effect July 1st, was spent in less than a month. In other words, people bought up around a quarter million more efficient cars.
I have to wonder how much gas will be saved. These were some of the least efficient cars (or, more likely, trucks and SUVs) on the road. I think the oil companies must be worrying over equations like this:
[1/4 million cars] X [average gas saved per mile] X [average miles driven per year] = [total reduction in gasoline sold in the next 12 months]
That may not be a huge reduction to their bottom line, but in markets that only like growth, the oil stocks will fall. And those vehicles will really be off the road: the dealers must send them to be crushed or they won't be paid the rebate money. So the supply of recycled steel will rise, sending steel prices down.
U.S. drivers will send less money to the oil industry and more to the auto industry, so car company stocks will rise. Which will probably mean the bailed-out U.S. auto manufacturers pay back the bail-out money sooner. And with customers preferring the efficient models over the gas guzzlers, the manufacturers will prefer to make those more efficient cars.
Such a positive response from both the consumers and the auto companies will drive Congress to add more funding. Once they do, there may be a repeat of these declines and rises. But it will be interesting to see what the difference in effect will be if the criteria are toughened, as some in Congress are advocating.
Lastly, with the average weight of cars going down, the easiest way to improve mileages, the number of auto fatalities might decline as well. We won't have data on this aspect for some time, though.
I will post a follow up later today to evaluate how good a guess I made in the short term.
-EcoGeekDan
I just read some news about the Cash for Clunkers federal stimulus program running out of money. The $1 billion of funding that Congress thought would last until November, or four months after going into effect July 1st, was spent in less than a month. In other words, people bought up around a quarter million more efficient cars.
I have to wonder how much gas will be saved. These were some of the least efficient cars (or, more likely, trucks and SUVs) on the road. I think the oil companies must be worrying over equations like this:
[1/4 million cars] X [average gas saved per mile] X [average miles driven per year] = [total reduction in gasoline sold in the next 12 months]
That may not be a huge reduction to their bottom line, but in markets that only like growth, the oil stocks will fall. And those vehicles will really be off the road: the dealers must send them to be crushed or they won't be paid the rebate money. So the supply of recycled steel will rise, sending steel prices down.
U.S. drivers will send less money to the oil industry and more to the auto industry, so car company stocks will rise. Which will probably mean the bailed-out U.S. auto manufacturers pay back the bail-out money sooner. And with customers preferring the efficient models over the gas guzzlers, the manufacturers will prefer to make those more efficient cars.
Such a positive response from both the consumers and the auto companies will drive Congress to add more funding. Once they do, there may be a repeat of these declines and rises. But it will be interesting to see what the difference in effect will be if the criteria are toughened, as some in Congress are advocating.
Lastly, with the average weight of cars going down, the easiest way to improve mileages, the number of auto fatalities might decline as well. We won't have data on this aspect for some time, though.
I will post a follow up later today to evaluate how good a guess I made in the short term.
-EcoGeekDan
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