Why Cash for Clunkers Could Devastate Auto Sales

The end of Cash for Clunkers

Cash for Clunkers is over.

More than 625,000 vehicles were sold as a result of the program, so I can’t imagine anyone who wanted to take the government up on its $4,500 offer missed out. Needless to say, the Cash for Clunkers program was hugely successful at luring people into dealerships to buy new cars.

But without the program, what happens next? Who will buy new cars now?

Well, guess what - I have a prediction: Auto sales will languish once again, and dealers will have one heck of a hard winter trying to sell enough cars to keep their heat on. The recovery of the auto industry will probably take even longer than it would have had the government just kept their hands off.

I don’t think Cash for Clunkers actually increased auto sales, I think it condensed auto sales into a single month. Which means the next few months are going to hurt for dealers and auto manufacturers.

Americans just binged on buying cars. The binge made us feel good. It gave us a sugar high of sorts that quickly spread across the country, resulting in even more binging. Now comes the big crash.

The fact that Ford, GM, and Chrysler all increased production of fuel-efficient vehicles made popular by Cash for Clunkers, combined with no more government assistance for consumers, means we’ll soon see an overstock of cars on dealers’ lots with no one to buy them.

Somehow dealers are going to have to lure people into their stores without powerful rebates, and we’ll be right back where we started.

Was Cash for Clunkers worth it?

-tgriffith

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Is GM on the verge of inventing a new kind of engine?

If GM can pull off this new bit of technology, I’ll officially recommend the company as the new definition of awesome.

It seems the General is experimenting with ways to combine the fuel efficiency of a diesel engine with the cleaner burning traits of a gas engine. It’s being called an HCCI engine, which stands for homogeneous combustion compression ignition. 

A traditional gas engine uses a spark from spark plugs to ignite the fuel. A diesel engine uses compression to accomplish that goal, essentially squeezing the diesel and air mixture until it ignites.

Until now no one has been able to create a gasoline engine that works on compression, which is more efficient because it burns the available fuel all at once rather than from a source point (the spark). To save all the other technical details, it translates into about a 15 percent jump in fuel economy. 

GM is developing the engine to run on combustion from idle to about 3,000 rpm, above which it would switch over to traditional ignition for power at highway speeds. While the HCCI engine will run like a diesel, it won’t provide the massive torque of diesel and will power only small cars. GM hopes to have the technology available within the next decade, but I wonder if by then it’ll be too little too late. 

It’s been a long time since a company has changed the way fuel is burned in an engine. While I commend GM on their innovative thinking, HCCI is the kind of technology we desperately need right now. 

Come on GM, get this thing to market in two or three years! Do that and we’ll all think you’re awesome.

How much extra would you pay for a vehicle equipped with a four-cylinder HCCI engine?

-tgriffith

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If you have one, maybe you’ll have a relic of American history and laugh ...

 

Big SUVs: Coming back in style?

Whoa, put on the brakes folks because we need to take another look at gas prices.

Believe it or not, as of September 24, prices of our addiction had FALLEN for 6 straight days. And get this: during the summer, prices actually fell for 34 straight days.

There’s probably not any hope of prices going back to the comfortable good ol’ days of $2 a gallon, but with prices comfortably below $4, imagine what could happen if prices stabilize or even continue to fall.

It’s certainly possible that Americans will get used to our current prices and fall right back into our old habits of driving big SUVs. Before we know it, we won’t even think twice before piloting our Expeditions across town just to pick up a Blizzard from Dairy Queen.

Hey, it could happen. Just as auto manufactures begin panicking and shifting towards smaller more fuel efficient cars, the industry could just go back to the way it’s always been.  Auto makers would be in a real lurch after that!

It all makes me wonder if the current consumer demand for high MPG cars is a short or long term shift.

If prices stay where they are for a long period of time, I’d bet on our collective love for the SUV and even venture to say that instead of a backlog of Sequoias, we’ll see Sentras clogging dealers’ lots.

Hybrids? HA! If you have one, maybe you’ll have a relic of American history and laugh as you remember the time we freaked out and lost our faith in good ol’ gasoline.

So what do you think? Is now the time to pick up that Yukon Denali, while the value of SUVs are at historic lows?

-tgriffith

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