One thing US President Obama did do to encourage American consumers to buy more fuel-efficient cars is the so-called “Cash for Clunkers” program, whereby eligible older cars (presumably, pollution-spewing gas-guzzling dinosaurs) can qualify for government rebates of $3,500 or $4,500 when traded in on newer (presumably more environment-friendly) vehicles.
As the old saying goes, be careful what you wish for.
On a couple of fronts, C4C has been wildly successful. Nearly half a million cars have been moved on the promise of the rebates, which has indeed been a stimulus to the car industry, although foreign brands have benefited as much or more than the domestic brands, two of which (General Motors and Chrysler) the government(s) now have an ownership stake in.
And the technological progress that has been the hallmark of the past decade with respect to both fuel efficiency and cleanliness means that the atmosphere probably is improving for the better with these half-million new cars on the road.
It has always amazed me that the state of California, whose Air Resources Board has been one of the strongest champions of green issues, is also apparently home to the entire world’s remaining supply of 1965 Volkswagen Beetles (nothing rusts out there) whose exhaust is, comparatively speaking, truly toxic. Ironically, it's often superannuated hippies and other tree-huggers driving these air-killers.
You’d think California would have done something like this decades ago, as indeed, many countries around the world have.
But C4C has also run into a few problems.
First, the $3 billion (US, of course) allocated to the program originally intended to last through November, has almost all been spoken for. The program officially ended yesterday.
Second, many dealers, while appreciating the extra business, are on the hook for tens to hundreds of thousands of dollars. The way it works is they give the purchaser the money, either in cash or as a discount on the car, then apply to the government for reimbursement.
If the request for funds is rejected for any reason, the dealer is on the hook. Even if the request is approved, the massive delays which have been very common do terrible things to his cash flow.
Which, if you’ve ever owned any business, you’ll know is the ONLY business there is.
As many as 70 percent of reimbursement requests have yet to be approved.
Many dealers chose to turn new C4C prospects away over the past few weeks, because they simply couldn’t afford the risk.
Nonetheless, Canadian dealers have been clamouring for a similar program. There is a $300 federal grant, which is far too low to have had any effect. B.C. has a richer program which has been quite successful. Some hybrids also qualify for various incentives in some jurisdictions.
But compared to $4,500, that’s all chicken feed.
Now, car sales in Canada aren’t quite as bad as in the US. Much of the “national” decline in 2009 has been in Alberta and B.C., and the year-over-year declines there are based on the hyperactive resource-based economies of those two provinces in 2008.
So the “downturn” in sales isn’t that dramatic when viewed in a broader context.
And if car sales get a boost, store owners in other retail sectors have a right to ask, "Why not me?"
Hyundai Canada announced last week that it will offer additional incentives of $500 to $1,000 based on the C4C principle. At least one Hyundai dealer in the GTA beat his company to the punch with a similar program. Chrysler Canada also offers $500 to $1,500.
Will these programs work?
If the incentive is big enough, consumers will go for it. Incentives like these will 'move iron' - that has been well-proven elsewhere.
What is far from proven is: is this the best use of your tax dollars to achieve either improvements to the environment or improvements to the car industry?
My guess is no.
Raise the price of fuel, keep it high, and let the marketplace decide.
This won't happen, certainly not in the United States, because the political will is simply not there.
So I guess - as usual - we will have to be satisfied with half-measures.