August 27, 2009
Three billion U.S. dollars used up in 30 days, the "crazy" Cash for Clunkers program in the United States is expected to come to an end. According to U.S. media reports, the U.S. Government announced last Thursday that the popular "Cash for Clunkers " program is scheduled to terminate at 8 pm EDT on August 24, and by then dealers must submit all applications to the government.
There has been only a month since the plan was announced on July 27, so why is the U.S. government eager to order a halt? The U.S. government said because the program was going amazingly well, it will soon use up the budget of 3 billion U.S. dollars.
As a result of consumers "unexpected" favor for the program, just four days after details of the program was released, the National Automobile Dealers Association (NADA) informed the Department of Transportation (DOT) that the one billion U.S. dollars the project originally scheduled would have been used up. On August 6, the U.S. House of Representatives approved an additional two billion U.S. dollars.
The primary reason for American consumers being so "crazy" is, of course, because it is cost-effective. Secretary-General Rao Da, of the China Passenger Car Association said "compared with other countries, the amount of subsidies in the United States ranks the highest; 4000 U.S. dollars for per vehicle, which is equivalent to one third of the price of low or middle-grade new cars."
In addition, the huge base of the U.S. auto market is also another reason. "There are more than 200 million vehicles in America, with more than 1.2 million vehicles scrapped each year. The vehicle scrapping rate reaches 6%."
Ford Motor's chief sales analyst George Pipas said with stimulation of the plan, the U.S. auto market will witness rise for the first time since October 2007.
On August 13, Ford Motor Company confirmed that the Ford Focus sedan has increased production.
However, there are still complicated new issues caused by Cash for Clunkers.
Dealers are racking their brains over the question: how to sell cars when the program ends? Besides, funds are a problem. Those dealers who have taken part in the Cash for Clunkers program need to pay in advance, and obtain subsidy funds from the government later. Due to complicate procedures, at present part of the funds has not reached dealers' hands, leading to difficulties in dealers' operations.
Analysts worry that if the dealer can not get subsidy from the government as soon as possible, they will run into debt, which in the end offsets positive results of this Cash for Clunkers program.
In addition, the program's effect in promoting environmental protection, energy conservation is clearly not evident.
Where will the U.S. auto industry go after the program? At this point, neither the U.S. government nor the auto industry can give an answer.