Last night we were shocked to see that The White House was using its blog to tear into car website Edmunds.com over some analysis it did of Cash-For-Clunkers. To recap: Edmunds.com says the program was a gigantic waste with little effect. The White House disagrees.
Anyway, Edmunds is sticking by its analysis, and it put out the following press release:
SANTA MONICA, Calif. — October 29, 2009 — Today the Department of Transportation and White House chose to respond to an analysis Edmunds.com released Wednesday that looked at auto sales this year and what sales volumes would have been had the popular Cash for Clunkers program never existed.
At issue is one point of the analysis showing the taxpayer cost for every incremental vehicle sold was $24,000. To be clear, Edmunds.com is not disputing the government’s statements regarding total voucher applications, vehicles sold or voucher values. The key question is how many of these sales would have occurred anyway.
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?
We’re on Edmunds side here. We haven’t seen any evidence that the program wasn’t just a massively expensive way of pulling demand forward, with little long-term to show for it.
An employee of a car dealership left this comment on the last post:
As an employee of a car dealership I will tell you first hand that the whole program was VERY temporary. Yes we broke every record we had ever set before. Sales are now lower than before due the the Cash for Clunker program. It was a great program and it did draw a bunch of people into the market that probably wouldn’t have bought until this winter. The problem is: now we won’t have the sales we would have had this winter. Everyone in the car business will tell you that November-February are the worst months for sales. Probably 30% of the sales that we made during the program wouldn’t have happened until those bad months.
We’re eager to see if The White House responds again.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.