SEMA eNews Vol. 12, No. 10, March 12, 2009

SEMA Confronts Cash for Clunker Myths in Europe

Germany has developed a “Cash for Clunkers” program at a time when the initiative has been rejected in the United States. Earlier this year, SEMA launched the largest grassroots effort in its 46-year history to successfully prevent inclusion of a national Cash for Clunkers program within the economic stimulus bill.

Cash for Clunkers programs accelerate the normal retirement of vehicles through the purchase of older cars, which are then typically crushed into blocks of scrap metal. 

Under the German program, the government is offering consumers 2,500 euros toward the purchase of a new car regardless of the CO2 emissions of the new model so long as they scrap a vehicle that is at least nine years old. In addition, the program allows German consumers to replace a more fuel-efficient older car with a less efficient newer model. 

Like the U.S. proposals, the European-style programs do not stand up to scrutiny. In fact, staff for the European Commission (EC) warned that the programs focus on age rather than actual emissions; that the cars collected may simply be resold in other countries; or that the scrapped cars were at the end of their useful lives anyway and worth far less than the subsidy.

Both the EC staff and the European Federation for Transport and the Environment have urged Germany and other countries to abandon the subsidies since they do more environmental harm than good by artificially accelerating the car life cycle.

Washington lawmakers correctly rejected a similar program to crush rarely driven second and third vehicles in favor of a targeted tax incentive to help boost new-car sales, namely a federal deduction of state sales and excise taxes. During the scrappage debate, members of Congress made the same comment time and time again: Why would we spend tax dollars to destroy good used cars? Excellent question.

Cash for Clunkers proposals may reemerge later this year. SEMA will remain vigilant in opposition and keep its members informed of all new developments.

For additional information, contact Brian Duggan at briand@sema.org.  

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