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March 16, 2010 12:00 AM

Clunkers programme didn't hurt future sales, study says

Utech Staff
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    By Shawn Wright, Automotive News

    Detroit, Michigan -- Last year's cash-for-clunkers programme increased US sales without damaging the number of future automobile purchases, as previously feared by critics, according to a study by Maritz Automotive Research Group.

    Maritz compared its consumer data with the federal government's data on total clunker sales, finding that about 542 000 consumers bought vehicles during July and August 2009 specifically because of the programme.

    The study also estimated that 223 000 vehicles sold were "halo sales" -- cars purchased by consumers who wanted to participate in the incentive programme but did not qualify, yet bought or leased a new vehicle anyway.

    "The cash-for-clunkers programme did create a large amount of incremental sales, to the tune of about 765 000 -- a pretty large chunk of total sales for those two months," said Dave Fish, vice president of Maritz Automotive Research Group.

    The study suggests the clunkers programme met its objective of creating jobs while replacing older, less-fuel-efficient automobiles with better-mileage, lower-emission vehicles.

    "This is consistent with what franchised new-car dealers across the nation were telling NADA," Paul Taylor, chief economist for the National Automobile Dealers Association, said in a statement. "The Maritz effort provides a thorough and valuable statistical sampling and analysis of consumers who participated in the clunkers programme."

    The study also found that the clunkers progamme wasn't "mortgaging the future of the industry by stealing sales that would have occurred otherwise."

    After a slight dip in sales in September 2009, the seasonally adjusted annual sales rate from October through December showed that automobiles continued to sell at a higher pace than before the clunkers programme began, according to statistics from the Bureau of Economic Analysis, a unit of the US Commerce Department.

    But the research also revealed that lessons remain to be learned from the inaugural programme. Future incentive programmes will require more emphasis on outreach and education directed at dealers and consumers to explain clunkers criteria, according to the study.

    Maritz said an opportunity existed to better educate Americans on how the programme works. More than 80 percent of people who wanted to participate in cash for clunkers had a trade-in vehicle that did not qualify, according to the study.

    "We know most of the problem is in education around what vehicles qualify, in terms of their trade-in," Fish said.

    Wilbur Ross, chairman of International Automotive Components Group, said during January's Automotive News World Congress in Detroit that the cash-for-clunkers programme was feeble and poorly administered compared to a similar programme in China. China budgeted $14 800 million for its programme, compared with $3000 million in the US.

    Ross favoured another cash-for-clunkers programme, saying the government should do it as soon as possible. Cash for clunkers gave consumers up to $4,500 in rebates on a new vehicle if their trade-in and new purchase met certain requirements. The programme ran from 27 July through 25 Aug 2009, though dealerships started taking applications as early as 1 July.

    "

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