Edmunds.com Cash For Clunkers Analysis Riles Obama Team : The Two-Way The war of words between the auto website Edmunds.com and the Obama Administration continues over Edmunds.com's claim that the true cost to taxpayers of the Cash for Clunkers program was more like $24,000 per car than government rebates of up to $...
NPR logo Edmunds.com Cash For Clunkers Analysis Riles Obama Team

Edmunds.com Cash For Clunkers Analysis Riles Obama Team

The war of words between the auto website Edmunds.com and the Obama Administration continues over Edmunds.com's claim that the true cost to taxpayers of the Cash for Clunkers program was more like $24,000 per car than government rebates of up to $4,500 per car.

Edmunds.com arrived at its startling figure by teasing out the number of vehicles sold that were attributable to the government rebate program from the number that would have been sold anyway.

The number they came up with was 125,000 of the 690,000 vehicle sales could be linked to Cash for Clunkers.

Divide the roughly $3 billion the Congress allocated for the Cash for Clunkers program and you get the $24,000 figure. This is what Edmunds.com reported on Wednesday.

Excerpts from its Wednesday report:

... "This analysis is valuable for two reasons," explained Edmunds.com CEO Jeremy Anwyl. "First, it can form the basis for a complete assessment of the program's impact and costs. Second--and more important--it can help us to understand the true state of auto sales and the economy. For example, October sales are up, but without Cash for Clunkers, sales would have been even better. This suggests that the industry's recovery is gaining momentum..."

... "Our research indicates that without the Cash for Clunkers program, many customers would not have traded in an old vehicle when making a new purchase," Edmunds.com Senior Analyst David Tompkins, PhD told AutoObserver.com. "That may give some credence to the environmental claims, but unfortunately the economic claims have been rendered quite weak."

On Thursday, the White House responded with snark.

... 1. The Edmunds' analysis rests on the assumption that the market for cars that didn't qualify for Cash for Clunkers was completely unaffected by this program.

In other words, all the other cars were being sold on Mars, while the rest of the country was caught up in the excitement of the Cash for Clunkers program. This analysis ignores not only the price impacts that a program like Cash for Clunkers has on the rest of the vehicle market, but the reports from across the country that people were drawn into dealerships by the Cash for Clunkers program and ended up buying cars even though their old car was not eligible for the program...

... 2. Edmunds also ignores the beneficial impact that the program will have on 4th Quarter GDP because automakers have ramped up their production to rebuild their depleted inventories.

Major automakers including GM, Ford, Honda and Chrysler all increased their production through the end of the year as a result of this program, which will help boost growth beyond the third quarter...

Edmunds.com response to the White House was, by contrast, snark-free and fairly persuasive:

Apparently, the $24,000 figure caught many by surprise. It shouldn't have. The truth is that consumer incentive programs are always hugely expensive when calculated by incremental sales -- always in the tens of thousands of dollars. Cash for Clunkers was no exception.

The White House claims that our analysis was based on car sales on Mars and that on Earth, the marketplace is connected. We agree the marketplace is connected. In fact, that is exactly the basis of our analysis.

It is also claimed we missed the possibility that Cash for Clunkers generated excitement and consumers bought vehicles even if they didn't qualify for the program -- a claim that has been widely supported by anecdote but by little analysis. It does, after all, seem a bit odd that masses of consumers would elect to buy a vehicle because of a program for which they don't qualify -- doubly so when you add in the fact that prices shot up during Cash for Clunkers, creating a disincentive to buy.

Finally, the White House claims that the increase in fourth-quarter production reported by the car manufacturers can be attributed to Cash for Clunkers. But here is a better reason: the economy is recovering accompanied by improved car sales. No manufacturer increases production -- a decision with long-term consequences -- based on the 30-day sales blip triggered by an event like Cash for Clunkers.

With all respect to the White House, Edmunds.com thinks that instead of shooting the messenger, government officials should take heart from the core message of the analysis: the fundamentals of the auto marketplace are improving faster than the current sales numbers suggest.

Isn't this a piece of good news we can all cheer?

The Two-Way

The Two-Way

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