SEMA eNews Vol. 12, No. 15, April 16, 2009

SEMA Challenges Claims That Cash for Clunkers Will Clean Environment

SEMA is disputing claims that vehicle scrappage programs will clean the air or reduce the nation’s dependency on foreign oil. SEMA contends that these misdirected programs do more environmental harm than good, and deny cash incentives to millions of Americans who want to buy a new car.

The scrappage debate was recently revived when President Obama endorsed scrappage as part of an overall strategy to help rebuild the U.S. auto industry.

Scrappage programs accelerate the demise of older vehicles which are then typically crushed into blocks of metal. These “Cash for Clunkers” programs focus on a car's age or fuel-efficiency rating rather than its actual emissions or how much it is driven.

SEMA argues that the environmental claims made by some congressional lawmakers do not withstand scrutiny. Given the low value of the cash vouchers being offered to consumers to purchase a new vehicle (generally ranging from $2,000–$5,000), the facts demonstrate that vehicles traded-in for demolition could include late-model vehicles that have been damaged in accidents or have mechanical problems. The programs would also collect rarely driven second and third vehicles.

While supporters tout a similar German program as evidence of success, the European Federation for Transport and the Environment has urged Germany and other countries to abandon scrappage subsidies because they do more environmental harm than good by artificially accelerating the car life cycle.

The programs do not calculate the estimated 15%–20% of CO2 emissions associated with manufacturing the new car.

In February, Congress expressly rejected vehicle scrappage when it passed the economic stimulus bill. Lawmakers are now revisiting two conflicting approaches. Under one bill, a car buyer would get a cash voucher for scrapping an SUV or pickup that gets 18 miles per gallon or less.

The other bill concentrates on emissions by crushing a trade-in older than eight years. Under the first program, the owner of a fuel-efficient car from the '80s or '90s could not get a voucher to trade-up to a new car. The car would be destroyed under the other program.

Statistics confirm that a majority of consumers no longer trade in a car at the dealership when buying a new car. In 2007, only 38% offered a trade-in, which meant that 62% of new-car buyers would have been ineligible to participate in a voucher program. Moreover, the vast majority of trade-in cars were just a few years old.

The facts demonstrate that people who are the most likely candidates to buy a new car would not qualify for a voucher or would have an artificial incentive to bring in a qualifying car that would not otherwise appear at the dealership.

“SEMA supports sensible solutions to help spur car sales and clean the environment,” said Chris Kersting, SEMA’s president and CEO. “Vehicle scrappage programs fail on both counts. Congress and the president should reject programs that are ripe for fraud, abuse and a waste of taxpayer dollars.”

SEMA supports tax incentives and other measures to encourage owners to upgrade, repair or maintain their used vehicles. There are a number of commercially available products that will substantially lower the emissions rates of older vehicles while also offering the owner added performance, drivability and fuel mileage.

“SEMA represents an industry that produces solutions,” Kersting continued. “Most automobile equipment to reduce air pollution or increase fuel efficiency were first produced by specialty-equipment manufacturers, including turbochargers and high-performance exhausts.

"The most cost-effective way to clean the environment is to simply retrofit older vehicles with environmentally friendly specialty equipment rather than destroying a perfectly useful car.”

SEMA supports a policy to continue restoring credit and financing for businesses and consumers. SEMA has also endorsed a proposal to allow consumers to deduct car-loan interest payments on their federal taxes, which should produce another 300,000 or more sales.

The economic stimulus bill enacted into law in February included a sales-tax deduction estimated to produce 100,000 additional sales this year.

SEMA supports congressional proposals to provide government-issued cash incentives to any person who wants to buy a fuel-efficient car as an incentive to spur sales. Restricting vouchers to a select few who have qualifying trade-ins is not a good business model.

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