Car sales up, but for how long?

[phk]

Car sales up, but for how long?

August auto sales provided the strongest signal of an economic rebound that we've seen yet. But August is so yesterday.

In terms of U.S. sales of cars manufactured in North America, this was the best August since 2006.



Sales of light trucks (which includes the SUV category) were less impressive-- up 17% from July, but down 18% from August 2008.



But imported light trucks were another story, up 39% from July and up 14% from August 2008.



And imported cars saw their best August since I've been collecting these data.



"But the real question," notes  Jesse Toprak, vice president for TrueCar.com, "is what will happen when this adrenaline shot [from Cash for Clunkers] wears off in September?"

An earlier report from MarketWatch had this sobering answer from Edmunds.com Senior Analyst David Tompkins: current purchase intent is down 50 percent from the Cash for Clunkers peak, and down 11 percent from the June average.



http://www.econbrowser.com/archives/2009/09/car_sales_up_bu.html

[opebo]

Car sales have been abysmal since the 1980 policy debacle.  More (and better) cars were sold during the Carter administration than anytime since.  Which is pretty impressive considering how much smaller the population was then.

[Marokai Backbeat]

I don't see how it matters. We broke people out of the mentality that leads itself to a liquidity trap, got people buying something again, and helped the environment in the process. Car sales will go down, considering that we're in the middle of a downturn, so that's to be expected. Demand is always low in times like these.

But I don't see how people buying less cars after CARS is somehow proof that the program was a failure.

[opebo]

I don't see how it matters. We broke people out of the mentality that leads itself to a liquidity trap, got people buying something again, and helped the environment in the process.

But I don't see how people buying less cars after CARS is somehow proof that the program was a failure.

Proper policy - income support for the working class - would put car sales back at the late 1970s levels permanently, MB.  If workers were making $35/hour with a sense of security they would buy lots of cars.

[fezzyfestoon]

It seems to be almost common sense to me that after an artificial boom in sales that there would be a huge crash.  People bought WAY more cars than they would have otherwise so now there is even less demand than there would have been had we not forced a boom.

[memphis]

It seems to be almost common sense to me that after an artificial boom in sales that there would be a huge crash.  People bought WAY more cars than they would have otherwise so now there is even less demand than there would have been had we not forced a boom.

^^^^^^^^^^^^^^^^^
Everybody who was thinking about buying a new car has now bought one. Expect a crash in the auto industry.

[Marokai Backbeat]

It seems to be almost common sense to me that after an artificial boom in sales that there would be a huge crash.  People bought WAY more cars than they would have otherwise so now there is even less demand than there would have been had we not forced a boom.

^^^^^^^^^^^^^^^^^
Everybody who was thinking about buying a new car has now bought one. Expect a crash in the auto industry.

lol

OH NOES, NOW THAT WE DON'T HAVE A REBATE PROGRAM NO ONE WILL EVER BUY A CAR AGAIN FROM THE MISMANAGED AUTO COMPANIES DURING THE WORST RECESSION SINCE THE 1930'S!

HOW COULD THE GOVERNMENT DO THIS, HOWWWW!!!!!

[Beet]

It seems to be almost common sense to me that after an artificial boom in sales that there would be a huge crash.  People bought WAY more cars than they would have otherwise so now there is even less demand than there would have been had we not forced a boom.

^^^^^^^^^^^^^^^^^
Everybody who was thinking about buying a new car has now bought one. Expect a crash in the auto industry.

lol

OH NOES, NOW THAT WE DON'T HAVE A REBATE PROGRAM NO ONE WILL EVER BUY A CAR AGAIN FROM THE MISMANAGED AUTO COMPANIES DURING THE WORST RECESSION SINCE THE 1930'S!

HOW COULD THE GOVERNMENT DO THIS, HOWWWW!!!!!

Indeed, the argument that cash for clunkers was ineffective because it merely pulled forward demand misses the point that that some of those people who bought cars under this program would not have bought a car next month, or the next, or the next, or indeed for a very long time, had it not been for this program.

Calculated Risk has estimated that at the current sales rate of under 10 million a year, the replacement rate for the existing US fleet is about 27 years. That means that at the current sales rate, cars would have to last an average of 27 years unless there was a permanent shrinking of the fleet.

Assuming that demand will rebound to a historically average 15 year replacement rate, which translate into an annual sales rate of 15 million units a year, similar to what was last seen in 2007, then cash for clunkers accomplished its goal of pulling forward demand from the future recovery phase (where it would have been artificially high due to pent up demand) to the present.

Assuming that no rebound in auto demand is coming in the future, then cash for clunkers created new sales where there otherwise would not have been sales in the future either.

We have heard of the idea 'something for nothing', that is, you can't have any gain without some cost (e.g., spending money), but until this year I'd never heard of 'nothing for something', that is, you can spend billions of dollars and not get anything in return. When the government spends $2 billion it ends up in someone's pocket: part the buyer, part the seller. So it was certainly stimulative.

[fezzyfestoon]

It seems to be almost common sense to me that after an artificial boom in sales that there would be a huge crash.  People bought WAY more cars than they would have otherwise so now there is even less demand than there would have been had we not forced a boom.

^^^^^^^^^^^^^^^^^
Everybody who was thinking about buying a new car has now bought one. Expect a crash in the auto industry.

lol

OH NOES, NOW THAT WE DON'T HAVE A REBATE PROGRAM NO ONE WILL EVER BUY A CAR AGAIN FROM THE MISMANAGED AUTO COMPANIES DURING THE WORST RECESSION SINCE THE 1930'S!

HOW COULD THE GOVERNMENT DO THIS, HOWWWW!!!!!

Ok, Keystone Phil.

Beet's explanation is nice, if a little optimistic.

[Sbane]

The cash for clunkers program didn't help everybody but only people with a specific situation. If people didn't have a really old car or if that old car already gave good mileage, this program didn't really help them. Plus the people who were thinking about buying midsize and bigger cars weren't helped by this program. The auto dealers will keep on giving discounts, and after cash for clunkers, will be able to give even more discounts and this will keep demand from crashing to new lows. The economy is the key though. If it looks like the economy is going down again, demand may crash. But if the economy looks to be picking up, a lot of people who weren't benefited by CARS will try to cash in on car company and dealer discounts.

[opebo]

Yeah it was silly to actually demand a 'clunker' as part of the deal - they shouldve just given everyone the $5,000 to generally stimulate demand, and to specifically stimulate the car industry the government itself shoud've bought about five million GMs and a million chryslers and thrown them in the ocean.

That said, I think there is still an enormous pent up demand for all sorts of things out there, including cars.  This program barely impacted car sales at all compared to where they should be at in normal times.

[fezzyfestoon]

Yeah it was silly to actually demand a 'clunker' as part of the deal - they shouldve just given everyone the $5,000 to generally stimulate demand, and to specifically stimulate the car industry the government itself shoud've bought about five million GMs and a million chryslers and thrown them in the ocean.

That said, I think there is still an enormous pent up demand for all sorts of things out there, including cars.  This program barely impacted car sales at all compared to where they should be at in normal times.

Yeah, fuck it.  Bankruptcy worked for GM and Chrysler, it can work for the government, too!

[CARLHAYDEN]

Fezzy,

Both you and Memphis have it correct.

Automobile manufacturers survey to see if someone is planning on purchasing a new automobile in the next six months.

What the 'cash for clunkers' program did was accelerate purchases into a short period, which will result in reduced sales for the next several months (relative to what sales would have been absent the program).

Auto manufacturers are getting the message from the surveys, and a very worried (particularly Government Motors and Chrysler).

[opebo]

Yeah, fuck it.  Bankruptcy worked for GM and Chrysler, it can work for the government, too!

The man with the gun never 'goes bankrupt'.

[fezzyfestoon]

Yeah, fuck it.  Bankruptcy worked for GM and Chrysler, it can work for the government, too!

The man with the gun never 'goes bankrupt'.

Exactly.  Which is why the US government will never get the money it needs for something like that.  You should know this by now.  The owners have a gun to its head.

[opebo]

Yeah, fuck it.  Bankruptcy worked for GM and Chrysler, it can work for the government, too!

The man with the gun never 'goes bankrupt'.

Exactly.  Which is why the US government will never get the money it needs for something like that.  You should know this by now.  The owners have a gun to its head.

That's not precisely the right way to put it, fussy.  The State is the gun, the owners are the man with it.

[fezzyfestoon]

Yeah, fuck it.  Bankruptcy worked for GM and Chrysler, it can work for the government, too!

The man with the gun never 'goes bankrupt'.

Exactly.  Which is why the US government will never get the money it needs for something like that.  You should know this by now.  The owners have a gun to its head.

That's not precisely the right way to put it, fussy.  The State is the gun, the owners are the man with it.

And now why would they want to turn the gun on themselves, exactly?

[opebo]

Yeah, fuck it.  Bankruptcy worked for GM and Chrysler, it can work for the government, too!

The man with the gun never 'goes bankrupt'.

Exactly.  Which is why the US government will never get the money it needs for something like that.  You should know this by now.  The owners have a gun to its head.

That's not precisely the right way to put it, fussy.  The State is the gun, the owners are the man with it.

And now why would they want to turn the gun on themselves, exactly?

Well, as you can see from the fact that some Keynesian policy has been implemented in the past, the controlling class or at least some large portion of it has believed that such policy would benefit them.

[k-onmmunist]

It seems to be almost common sense to me that after an artificial boom in sales that there would be a huge crash.  People bought WAY more cars than they would have otherwise so now there is even less demand than there would have been had we not forced a boom.

^^^^^^^^^^^^^^^^^
Everybody who was thinking about buying a new car has now bought one. Expect a crash in the auto industry.

lol

OH NOES, NOW THAT WE DON'T HAVE A REBATE PROGRAM NO ONE WILL EVER BUY A CAR AGAIN FROM THE MISMANAGED AUTO COMPANIES DURING THE WORST RECESSION SINCE THE 1930'S!

HOW COULD THE GOVERNMENT DO THIS, HOWWWW!!!!!

You're the biggest joke of a poster on this forum.

[CARLHAYDEN]

From the Cleveland Ohio Business News:

CLEVELAND, Ohio -- While "cash for clunkers" rebates helped most automakers post sales gains for small cars in July, General Motors' numbers fell sharply.

The Lordstown-built Cobalt compact car fell 43 percent, despite being the company's most fuel-efficient offering, a distinction that could have qualified some buyers for a $4,500 government rebate on the vehicle.

Sales at the automaker fell 19.4 percent, a sharp contrast to Ford's 2.3 percent increase and Chrysler's 8 percent drop.

[opebo]

From the Cleveland Ohio Business News:

CLEVELAND, Ohio -- While "cash for clunkers" rebates helped most automakers post sales gains for small cars in July, General Motors' numbers fell sharply.

The Lordstown-built Cobalt compact car fell 43 percent, despite being the company's most fuel-efficient offering, a distinction that could have qualified some buyers for a $4,500 government rebate on the vehicle.

Sales at the automaker fell 19.4 percent, a sharp contrast to Ford's 2.3 percent increase and Chrysler's 8 percent drop.

Yes, I never could understand why they made 'cash for clunkers' apply to other automakers besides General Motors and Chrysler.  Really made no sense to give a subsidy to foreign carmakers or Ford.