In Part I, I wondered if the “Cash for Clunkers” Program steered existing domestic car customers to the Big Three’s foreign competitors.  Starting with this post, I’ll show the results of my research.

Two disclaimers:  first, I am a big believer in free trade.  If the CARS program had limited new purchases to domestic vehicles only, the U.S. would be violating our agreements with our trading partners.  As President Obama found out earlier this year in attempting to keep stimulus spending to US vendors, the government can’t discriminate like that without repercussions from our allies, or even from foreign competitors who have direct investments such as manufacturing plants in the US .

Second - the data I have to work with is imperfect.  What I would like to see is the number of domestic vehicles have been destroyed vs. the number of new domestic vehicles purchased under the program.  The Dept. of Transportation is not releasing much data yet, so we’ll work with what we can get from outside sources.

My data is based on Edmund’s list as it was on August 3rd.  It is not a complete list because Edmunds assumes, reasonably, that if the vehicle has a book value of over $4500 the owner will sell or do a trade-in rather than use the CARS program.  Also, Edmunds counts different trim options as different models; I don’t.  In other words, I count a 95 Chevy Blazer with rear wheel drive as the same model as a 95 Chevy Blazer with all wheel drive.  Edmunds also does not list most vehicles manufactured before 1989.  Finally, I ignore minority fractional ownership when listing OEMs and brands (for example Ford owns a small percentage of Mazda).

Let’s look at the number of models eligible for “clunker” status, by manufacturer (click the graphic for a bigger view):

Eligible Clunkers

Now let’s look at the number of eligible new models.  This is also based on a list from Edmunds, and again I do not count different trim packages as different models:

Eligible New Models

Here’s a visual representation of the geographic source of the clunker models:

Clunkers by Country

And here’s the home countries of new models eligible for the CARS program:

New Car Models by Country

Does this prove that GM car owners are moving en masse to overseas competitors because of the CARS program?  No.  I don’t know how many vehicles per model are out there to use the program.  There could be two million ‘99 Toyota Tacoma owners out there ready to buy brand new ‘09 Chevy Silverados, and only one ‘99 Silverado owner waiting to buy a new ‘09 Tacoma.  I do think it is a good indication that car owners are being at least partially incented to buy from manufacturers who are traditionally strong in small, high-milage vehicles, i.e. Japanese manufacturers.

Why does it matter, given global manufacturing and the fact that foreign car companies manufacture vehicles in the US?  Because the US government just spent about $80 BN on GM and Chrysler, and by skewing the incentive towards smaller vehicles, they’re undermining their own rescue efforts.

There is absolutely no question that CARS has provided a desperately needed boost to dealerships.  It’s also provided an enormouse opportunity for Toyota, et al to take market share away from the Big Three.  Had I designed the “Cash for Clunkers” program, I would have applied it across the board rather than to select models; it’s not like environmentalists are happy with the Program as it is anyway.  This would have given the Big Three more of a chance to retain their core customers while they retool.

UPDATE 08/06/09:  Edmunds’ auto industry site has an article with some additional quantitative data; they collected a sample of actual Cash for Clunkers transactions.  From the article:

Edmunds.com’s data shows vehicles traded in under the Cash for Clunkers program are not at all different from the vehicles traded in before Cash for Clunkers…

…the data shows the vehicles purchased to replace the clunkers turned in under the government’s CARS program were different from those that would have been purchased without the clunker reimbursement. Most notably, they were more apt to be cars and they were vehicles that delivered much better fuel economy.

In other words people are trading in the same vehicles as before (Ford Explorers and F-150s hold the top two spots) but they are purchasing more fuel efficient cars than they normally would. That would seem to support my theory, but Edmunds list the Focus and Escape as the top two new models, and their top ten list does not show movement away from domestic vehicles. On the other hand, the press release from the National Highway Transportation Safety Administration on the CARS Program shows Detroit claiming only four of the top ten new vehicles spots.

UPDATE 08/18/09:  MarketingCharts.com has some interesting charts and data:

Data released by the National Highway Traffic Safety Administation revealed that the #1 vehicle being traded in under the program is the Ford Explorer, and all of the top 10 trade-ins are American-made vehicles…only four of the top 10 [new] models are manufactured by GM, Chrysler or Ford.

And the Financial Times, in “Cash-for-clunkers boost Japanese Car Sales”, reports that

Toyota has an 18.9 per cent share of vehicles bought so far, putting it ahead of General Motors with 17.6 per cent and Ford with 15.4 per cent. Chrysler is in fifth place, after Honda.

(hat tip: Sari Signorelli)