Photo: kbass941
It’s not official yet, but it’s getting close: the United States may have its own cash for clunkers plan in the works. Notably, the United Kingdom just instituted their own cash for clunkers plan, though that plan is short term and relies on the voluntary participation of automakers.
Unlike the UK program, the two plans floating around the US legislature right now focus on getting vehicles with below average fuel economy off the roads.
Plan #1: Cash for American autos
One of the plans will offer up to $5000 to the purchase of a new car. However, there are a few pretty big catches:
- Only American cars can receive the full $5000;
- Cars manufactured elsewhere in North America will receive less;
- Foreign cars will receive nothing;
- Cars must get 27 mpg (trucks 24 mpg) to qualify.
Frankly, this plan is a bad one. Right now the Japanese and European automakers are the ones with high mileage cars ready in other markets and having the government price them out of business is not going to encourage them to sell them here. Who is going to buy the fuel-efficient Toyota Yaris when relatively inefficient Chevy Aveo costs $5000? I’m not economically conservative by anyone’s yardstick, but protecting our failing auto industry with incentives is not going to help the country in the long term.
Plan #2: Cash for inefficient vehicles
The other plan will give tax credits of up to $4,500 dollars to consumers who trade in vehicles that get less than 18 mpg and purchase vehicles that get at least 25% better mileage than the segment average.
This plan is a much better one. Instead of picking arbitrary fuel economy targets, it encourages a constant increase in fuel economy in terms of a percent above the average. This means perpetual innovation without the need to legislate every few years. Furthermore, it is the most inefficient vehicles that will benefit for higher mileage. A 25% increase in fuel economy on a full-size truck will save more than a corresponding increase on a Prius.
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I am interested in your opinion of what the British environmentalist George Monbiot has to say about scrappage, at: http://www.monbiot.com/archives/2009/03/10/scrap-it/
I am enjoying your blog. It influenced me to buy a Toyota Echo lately and try my hand at ecomodding and hypermiling…
Hi John,
Thanks for the comment. That’s a good post by Monbiot, even if it is a bit overdone. I tend to agree with him, these things are pretty much scams, as are what they have in Japan. However, the Japanese system, rather than scrapping cars, simply prepares them for export to other countries or disassembly into parts to be used in repairs, so it’s not destroying working cars.
Good luck with the Toyota Echo!