The most reasonable assumption about the 'car scrappage' scheme in the UK, known as 'cash for clunkers' in the USA, 'Umweltprämie' in Germany and something completely unintelligible in France was that it would lead to people buying their next car earlier than they otherwise would have done, so while it may boost sales in the short term, we'd expect sales in the following months to be even lower than they otherwise would have been.
The US scheme ended at the end of August 2009. To the best of my knowledge, nobody expects them to start it again (if people did, that would depress sales in the interim period even further).
And, lo and behold, while there were about 500,000 more sales in the two months July and August compared to average monthly sales of about 800,000 in the first six months of 2009 (rough figures taken from this chart), sales in September 2009 were reported to be down by 26% compared to September 2008 and down by 38% compared August 2009 (taking a simple average of the figures in this article), which means sales were about 750,000, which is in fact only 50,000 less than the average for the first six months of 2009 (again, we have to assume that monthly sales would have been 800,000 in the absence of the scheme).
This is a smaller fall than I would have expected, but it is then wide open to debate by how many months sales were shifted forward; if sales stick at 750,000 for the next ten months, then you could argue that this is an overall shortfall of 500,000, but as we will never know what sales would have been etc etc.
So I'll call this one a goalless draw, for now.
Stormlight
1 hour ago
3 comments:
I'd suggest it is goalless draw no matter what the timescale. Subject to one thing.
The goalless draw is guaranteed to be the default position because people only have so much to spend.
They might spend it all now or they might spend some now and some later. They might spend all of it on a car or some of it on a car and £2,000 (the alleged "saving") on other things. They spend the what they can afford.
But then there is the other factor, the :::ahem::: in the government's woodpile. Perhaps they spend less. The "saving" of £2,000 on a new car might result in a reduction of spending of £2,000 because instead of spending the extra £2,000 they pay-down debt or increase savings.
"Cyril we need a new car."
"Yes, my dear Mabel, but we can't afford it until we save another £2,000."
"Don't worry, my sweet, the government is reducing car prices by £2,000 and all we have to do is trade-in our lovely Morris Marina."
"Thank you Mabel, and thank you Gordon."
What do you think Cyril and Mabel will do with the £2,000 they would otherwise have saved and spent on a car in two years' time? Yes, you're right, they might spend it (but not yet because they don't have it now) or they might save it. But they still had the same total amount to play with, new car or no new car.
This is why I can never agree that such schemes are an economic "stimulus". They might bring forward some purchases, but all that does is bring them forward and that necessarily suppresses the level of sales later.
In the end, cash for clunkers did not help the car industry. It only caused used car prices to rise and cost auto repair shops, car donation charities, taxpayers and the poor a lot of money.
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