Mexico Announces Cash For Clunkers Program
America’s traditional method for clunker-culling was to load old cars onto a truck and ship them to market in Mexico. That changed last year when Mexico banned the importation of vehicles built before 1998. Now, Mexico’s president Felipe Calderon has announced a scrappage scheme for his country, in hopes of jumping on the car sales bump bandwagon. According to El Universal [in Spanish, Hat Tip: Gato Negro], the program
“will grant 15,000 mexican pesos [about $1,000] towards the purchase of a new car. The clunker must be 10 years old at minumum. Initial budget will be 500 million pesos, expandable to 1,000 million. The cost of the new car should not exceed 160,000 pesos. Also: The car must be assembled in Mexico [or another NAFTA country] or imported by one of the seven brands that have a car factory in Mexican territory.”
Meanwhile, the Wall Street Journal quotes analysis which shows that Europe’s 6.8m oversupply for 2009 will grow to 7.2m in 2010, because “scrappage schemes are significantly distorting the dynamics of the European market.”
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"America’s traditional method for clunker-culling was to load old cars onto a truck and ship them to market in Mexico. That changed last year when Mexico banned the importation of vehicles built before 1998." ...not exactly true. Just an FYI, This isn't new or only since last year. This has been in effect for over a decade (I've dealt with selling cars to Mexico since the early 1990's). Occasionally the restriction will be adjusted, or temporarily lifted on cars or trucks or both for a few months at a time depending on supply and demand in Mexico. The announcement you are referring to was simply an announced reinstatement. Since most journalists weren't aware of standing Mexican policy on this, it was picked up and reported as something new. I saw one news report that even tried to spin it into some form of protectionism or a diplomatic protest. The executive branch in Mexico has the power to adjust this policy by decree and can do so on short notice although generally there is at least a months notice. These decisions are usually handled by the Mexican Aduana (customs).
On the capacity issue, the Journal misses a bigger and more frightening story: Worldwide capacity is 90m cars. Current sales 50m cars. A lot of factories must close. Keeping them on life support makes everybody's life miserable.
When I use to live in Colorado, I would often see one old car pulling another old car headed south for Mexico. The cars really were junkers, and the towing setup was poorly done. They guys driving always had a look on their face like they weren't sure they were going to make it to Mexico and it was dangerous for everyone around them. But it did clear up in my mind where they went to die. (lol)
I read that the new car can cost as much as 250K pesos, which will buy for instance a base Escape, a decently-loaded Caliber or a base Camry.