Clunker Rush Collapses Supply
The good news, despite the Automotive News [sub] “Cash For Clunker Chaos” subhead, is that none of the automakers are completely out of cars. Regardless, clunkermania clearly took almost all of the OEMs by surprise. In July, Chrysler’s inventory reportedly plummeted from 71 days supply to 30, a huge reversal from the not-so-long-ago days of sales banks and channel-stuffing. But perhaps the biggest surprise is that Toyota was caught napping as badly as GM. Last month Toyota and GM both saw their inventories reduced by 18 days’ supply. But because Toyota started the month at a near-ideal 47 days’ supply, it now finds itself scrambling for vehicles with only a 29-day supply. Thanks to months of weak sales (and despite a long summer shutdown), GM started July with 82 days of supply. That number now sits at 64. Is GM saddled with inventory that doesn’t qualify for the CARS rebate? Possibly, but the only GM model cracking the top ten clunker models is the Cobalt. At number 10. Mind the perception gap!
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davejay: nice analysis, but what's your conclusion? How does this make you react to the program- positive, negative or neutral? John Horner: I can get behind your conclusion. There are many benefits that othes have mentioned (fuel economy, emissions, safety, sales tax revenue.) But the biggest VALID fear I hear is pulling sales forward. Meaning $3B for a program to spur economic activity that was already going to happen. But what if those future sales never happen? We may never get to 17,000,000 sales a year again if people can't get out of this economic rut. Stimulus packages like this are jumpstarts, not longterm solutions. And if it works, people won't just stop buying next month. Once the ball starts rolling, hopefully momentum will carry the auto industry until the economy rebounds. I think about retailers on the ropes. If they survive this downturn (unlike Circuit City or Sharper Image), people will shop again. But it doesnt matter if people will return if the stores close. So they do whatever they can to keep the doors open. This $3B is keepin the dealer's doors open until people start shopping again on their own (plus all those other great benefits!!).
The government makes the customer fill out a little survey, so we will know soon enough income levels, whether or not they would have bought without the clunker program and how long it would have been before they bought if it weren't for the clunker program. As for inventory, 4 cylinder inventory is drying up, which will mean higher prices soon enough. At my store, we are already reducing discounts on Elantras and are charging full MSRP on the Touring.
I think John Horner is on the right track. I'll bet there are quite a few other folks just waiting for our congresscritters to change the rules so that more "average" Americans can qualify. We aren't in the market for a new car now, but in about 1 year when some college costs go away, we might be. None of the 4 cars in our family qualify right now (either too efficient or worth more than $4500). If they loosened the rules a little bit, we might think about a new car right now. Is that a stimulus today, or just stealing from sales in 2010?
I would like to read TTAC's analysis of Edmunds' findings of the real top 10 at reported here... http://money.cnn.com/2009/08/07/autos/cash_for_clunkers_sales/index.htm