Joe Biden Wants to Bring Back Cash for Clunkers

Earlier this week, presumed Democratic nominee for president and former shut-in Joe Biden discussed some of the changes he’d make if elected. While most do not overlap with the automotive industry and would force your author to digress into rants about the perils of unchecked government spending, one item tied to his ambitious $2 trillion climate proposal is related directly to cars — and feels uncomfortably familiar.

Biden appears interested in bringing back the Car Allowance Rebate System (aka Cash for Clunkers) from the last recession, or at least a version 2.0 that accelerates electric vehicle adoption and development inside the United States.

We’ll try to remain objective on this one and wait until the bitter end before it devolves into a true editorial rant. Still, we’ve been fairly critical of the Obama-era program in the past, and even attempted to determine its long-term value (or lack thereof) after Ford suggested its return in April. If you’d like some background on the plan and its ramifications, read that article here.

However, if you’re simply curious about the public consensus on how effective Cash for Clunkers was at stimulating the economy and helping spruce up the environment, you’re completely out of luck. Some called it a triumph, citing the uptick in fuel efficiency and new-car buying upon its introduction as proof. Yet there’s also plenty to criticize. In addition to creating tons of waste/pollution — as old cars were dumped and new ones were manufactured — U.S. auto sales actually cratered in the proceeding months.

Your author is of the mind that the program’s greatest achievement was temporarily funneling billions of tax dollars into the industry by incentivizing new vehicle purchases. The national gains in fuel efficiency were also arguably predetermined by that era’s rising gas prices. Plenty of articles written immediately after 2009 support those assertions. However, many pieces written right before Cash for Clunkers’ implementation or years after its completion were far kinder.

While Biden’s plan is nowhere near polished enough to toss at Congress in its present form, it mimics a similar proposal floated by Senator Chuck Schumer (D-NY) in October. Schumer’s plan doles out $454 billion over the next ten years to encourage Americans to trade in internal combustion-powered cars for an EV or hybrid. It also contains an economic justice aspect that would offer additional incentives to low-income households — and requires the installation of 500,000 charging stations across America.

“These are the most critical investments we can make for the long-term health and vitality of the American economy and the safety of the American people,” Biden told a crowd in Wilmington, Delaware, on Tuesday.

“Here we are now with the economy in crisis, but with an incredible opportunity not just to build back to where we were before, but better, stronger, more resilient, and more prepared for the challenges that lie ahead,” he continued. “And there is no more consequential challenge that we must meet in this next decade than the onrushing climate crisis.”

He said the strategy would make it possible to replace 63 million traditional automobiles with electric ones by 2030 and hopefully result in the proliferation of high-tech jobs.

Biden’s strategy seems closely aligned with Schumer’s (almost copy-pasted) and takes the additional step of requiring all government vehicles to become electric. He also used this as an opportunity to talk tough on China — following criticisms that he’s been soft on the nation for decades — by stating that these cars would be built in the United States. That leaves a lot of wiggle room in the absence of highly specific clarifications.

A Chinese-owned firm could effectively have its American arm turn the last few screws after shipping and claim it was “Made in America” unless very clear benchmarks were put in place. It already does this with consumer electronics on a fairly regular basis, and we don’t trust the government to enact something that can’t be taken advantage of via loopholes. Consider all the sneaky hedge funds that scored and kept millions of dollars through the Paycheck Protection Program — even though they were technically “ineligible.”

Accelerating EV adoption this aggressively is truly callous in our opinion. China’s blind push into electrification backfired as consumers started pulling out of the market, unsure of what the next round of regulations or incentives would look like. Subsequent cuts to subsidies then crippled the auto market and started negatively impacting some of China’s biggest brands.

That’s not to suggest we shouldn’t transition toward electric vehicles. Tesla has shown that real demand for them exists in North America; there’s no reason to think the technology won’t continue to improve to a point where EVs may someday become the dominant mode of transportation. But it needs to coincide with the pace in which the energy grid evolves — lest these vehicles become the biggest boondoggle in history.

As things currently stand, immediate nationwide electrification is a pipe dream. The grid couldn’t possibly support it in its present form and only about 17 percent of energy created by the United States comes from renewable sources. That figure would need to come up immensely ( along with energy production in general) to be environmentally sustainable and would cost at least a trillion dollars to implement effectively. Meanwhile, you’d have energy prices shooting through the ceiling as demand climbs exponentially.

Then we have the cars themselves. Keep in mind that we’ve refined internal combustion vehicles for over a century, while electric vehicles are something we’ve only recently gotten serious about. Despite having loads of promise, they’re still in their infancy and aren’t yet supported by the market to a point where they can stand on their own. Doubling down hardly seems prudent before they’ve been given an opportunity to be better than gas-powered cars, and subsidizing them to such an extreme degree gives manufacturers less reason to help the improvement process along.

Shit, we don’t even have any evidence that the industry could manufacture enough electric cars to make this happen by 2030. Back in 2016, when the world looked a lot more promising, NASDAQ estimated there would be about 400 million EVs in the world by 2040 — and about 2 billion units would be needed for total global supremacy. That projection also assumed EV volumes would increase annually, which hasn’t been the case. As the market plateaued, plug-in sales (which includes hybrids) actually declined in 2019 by around 8 percent against 2018.

Even though automakers talk a big game about their commitment to the environment and the pathway toward rampant electrification, their early attempts have left a lot to be desired. Materials for battery production have been difficult to come by and storage capacities aren’t progressing as quickly as hoped. We need to grow up and stop pretending that electrification is the single biggest factor in saving the environment. It’s utterly meaningless without a comprehensive strategy surrounding it and may actually do more harm than good if rushed before all the pieces can be put into place.

Biden/Schumer’s plan (already endorsed by the UAW) seems irresponsible, shortsighted, and ignores the current realities of the market and the current capabilities of the industry.

Conservation needs to become part of the environmental discussion while we pursue a multi-faceted approach that doesn’t endanger the automotive sector and economy at large. I hate to sound like a centrist, free-market maniac, but it has habitually outperformed social engineering in terms of delivering desirable products and a robust infrastructure to support them. I could always be wrong, but it doesn’t feel like we can’t win this one through government decree.

[Image: Paul Brennan/Shutterstock]