We debated these car scrappage subsidies at length a few months ago. Adrian Wrigley's pointed out that "People who would have bought during the year buy sooner", and by implication, that sales will fall back to slightly below their equilibrium level once the scheme ends.
Via Karl Denninger, a good opportunity to say "We told you so!":
Sept. 16 (Bloomberg) -- Chrysler Group LLC, the U.S. automaker run by Fiat SpA, said nationwide industry sales are off 19 percent so far this month after a government purchase-incentive program ended...
Light-vehicle sales in the U.S. last September ran at a seasonally adjusted annualized rate of 12.5 million, which was the lowest since March 1993. A 19 percent decline would equate to a 10.1 million annual rate, higher than any of the first six months of 2009.
The U.S. government’s “cash-for-clunkers” incentive to trade in older gas-guzzlers for more efficient new vehicles led to a jump in sales in July to an 11.3 million rate and in August to 14.1 million, according to Bloomberg data. The program ended Aug. 24.
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10 comments:
As we all know that we are going through hard time of world economy. Its all happened because of that.
Although I agree with you I think you've jumped the gun a bit, for a) this is Chrysler, and b) a 19% year-on-year decline would in fact be better than most of the months in 2009, and for that and various other reaons could not therefore by itself prove the point.
The slight increase in sales came at the expense of used car sales, auto repair shops, auto parts stores, charity car donation, taxpayers and the poor.
Matthew, you have to compare 14.1 million sales in August 2009 with 10.1 million sales in September 2009. (Assuming Chrysler are telling the truth, and that remains to be seen, of course they are trying to get the scheme extended).
C4C, exactly, and overall, everybody ends up slightly worse off, it is just that politicians like to concentrate on a small identifiable group of winners and not a much larger and more diverse group of losers.
Not really. No-one would argue that sales wouldn't fall once the programme ended, otherwise the programme would not have had any effect. It's whether the rate of sales undershoots what might have been expected in the absence of C4C and by how much.
Matthew: "It's whether the rate of sales undershoots what might have been expected in the absence of C4C and by how much."
Exactly. Chrysler are probably exaggerating, but taking the figures at face value ...
Sales September 2008 (prior to scheme): 12.5 million (annualised)
Sales August 2009 (during scheme): 14.1 million (annualised)
Expected sales September 2009 (after scheme): 10.4 million (annualised).
But there's no reason to believe sales in September 2009 in a world without C4C would have been the same as in September 2008. In some of the first six months of 2009 the year-on-year decline was above 40%.
Matthew, there is no reason to believe anything, to be honest.
But if you can dig out the monthly sales for every year for the past few years then we can do a proper graph and see for ourselves. What we are trying to find out is whether C4C merely encouraged people to bring forward purchases (i.e. overall sales were flat) or whether it led to a modest increase in sales, overall.
Ok, will do. But remember my argument is its too soon to know, not that I don't think that will be the impact.
Ok, here's the charts, monthly in units and % change year-on-year.
http://www.matthewturner.co.uk/Images/1.pdf
If the 19% down year-on-year does happen in September, then I'd say the advantage is with the 'boost sales' camp as that would look (I'd argue) about where sales would have been if the market had been left alone (monthly sales were slowly rising before June, albeit erratically, and the decline in the year-on-year declines was more to do with the collapse in same month of 2008). This would mean the boost in sales in June-August has added to sales.
However, I've seen quite a few reports saying the 19% year-on-year decline in September (to 10.1m annualised) might be way over optimistic, with some talking abot 8m, so 666k/month on my first chart and a 36% year-on-year decline. That would strongly suggest all the additional sales were merely brought forward.
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