WASHINGTON, D.C. — The Automotive Aftermarket Suppliers Association (AASA) reported in its Washington Insider that Senate debate this week is expected to include discussion and possible votes on two different proposals to encourage consumers to purchase new cars. The measures, dubbed “Cash for Clunkers,” are championed by Sens. Debbie Stabenow (D-Mich.) and Diane Feinstein (D-Calif.).
The Stabenow proposal, which is similar to a provision introduced by Rep. Betty Sutton (D-Ohio) will provide a voucher for consumers who turn in an older car that gets less than 18 mpg if purchasing a vehicle that gets at least 4 mpg more than the older car. Vouchers would range in value from $3,500 to $4,500 and the drivetrain and engine from the original vehicle must be scrapped.
Under the Feinstein proposal, consumers would receive a voucher ranging from $2,500 to $4,500 for turning in a vehicle that gets 17 mpg or lower and purchases a new, fuel-efficient vehicle that gets at least 7 mpg more than the original vehicle. Like the Stabenow proposal, the drivetrain and engine from the original vehicle must be scrapped, which many aftermraket associations and businesses oppose.
Opponents of the proposed bills, including AASA and others, have issued numerous statements, letters to Congress and testimony in an attempt to explain the negative consequences associated with passage of these bills. (For our most recent reporting on Cash for Clunkers, click here.)
One automotive association in support of the bill is the National Automobile Dealers Association, which said it applauds the progress being made with the legislation. And while the nation’s auto dealers believe a "Cash for Clunkers" bill will help revive U.S. auto sales, a recent review by BB&T Capital Markets’ Tony Cristello shows the measures may not be enough to move the needle significantly. BB&T believes there will be little impact on the aftermarket, if passed.
“We see more bark and less bite when it comes to CFC [Cash for Clunkers] implications on traditional aftermarket participants," said Cristello in the April research note.
“Remember, many of these autos are likely in the hands of lower-income individuals, perhaps already placing a downward bias on the amount of true aftermarket spending seen on these units," wrote Cristello. "We acknowledge that the recent introduction of accelerated vehicle retirement programs in various European countries has served as a catalyst to new vehicle sales. In Germany, new passenger car registrations increased roughly 22 percent and 40 percent in February and March, respectively. However, in our opinion, the majority of the spike in new vehicle sales was not tied solely to the €2,500 environmental bonus (similar to the vouchers proposed in the United States) from scrapping vehicles 9 years old or older. Instead, we believe that motor vehicle tax reform—in addition to uncertainty on the part of many German motorists as to the timing and expiration of these government programs, contributed to a much larger degree. As such, we believe that the CFC legislation in the U.S. Congress, which in its current form solely specifies conditions for the provision of vouchers, is far less likely to generate a similar, material pickup in new auto sales."
Hyundai Motor America yesterday released survey data showing that as of May 29, at least 38 percent of potential new car buyers in the U.S. were aware of a pending fleet modernization program and 11 percent of car buyers are delaying their purchases until this legislation is passed or defeated. According to Hyundai, this represents as many as 100,000 lost industry sales each month due to uncertainty around this program at expected average sales volumes of 1 million units per month over the summer.
