Cash For Clunkers A Gift For Honda and Toyota
Jason Lancaster | Aug 26, 2009 | Comments 14
When the “Cash for Clunkers” program (a.k.a. CARS) was signed into law 2 months ago, there were a lot of different advantages pitched at the American taxpayer:
- CARS will help the environment by getting rid of polluting old vehicles
- CARS will help the economy
- CARS will help the auto industry
- CARS will help the domestic automakers earn a profit
While we can’t speak to the environmental, economic, or overall auto industry benefits, we CAN speak to the idea that the CARS program helped domestic automakers: For 3 out of 3 domestic manufacturers, the answer is NO.
According to a recent report from IBISWorld, an independent company that analyzes the auto industry, the domestic manufacturers took less than there fair share of the cash for clunkers dollars.
Here’s the data:
| Manufacturer | 2008 Market Share | 2009 Market Share | CARS Market Share |
| GM | 21.2 | 19.5 | 17.6 |
| Ford | 14.8 | 15.5 | 15.4 |
| Chrysler | 11.3 | 9.6 | 9.1 |
| Toyota | 16.8 | 16.3 | 18.9 |
| Honda | 11.0 | 11.1 | 12.9 |
*The market share data above is based on the first 7 months of 2008 and 2009 in order to be as equivalent as possible.
As you can see, IBISWorld projects that the domestics (especially GM and Chrysler) underperformed in the CARS program.
While it seems logical that GM and Chrysler would see a dramatic drop in market share between 2008 and 2009 (their widely publicized bankrupcties most definitely hurt sales), there’s no easy explanation for GM and Chrysler’s below-market-share of the CARS dollars.
Some argue that GM and Chrysler didn’t have enough vehicles that were eligible for the CARS program, and that may be true. Of course, a GM spokesperson bragged that GM has 74 vehicles eligible for the program (see NewsWeek), and 15 of Chrysler’s 28 models were CARS eligible as well. It’s also possible that GM and Chrysler inventories were too low following the bankruptcy-induced halt in production, and that this low inventory caused a cease in sales. There’s some evidence to support this – when the CARS program first got underway, the Detroit News reported that the Big 3 were capturing market share.
It could also be that Toyota and Honda had more compelling models – 5 of the top 10 sellers in the CARS program were small cars. Whatever the case, GM and Chrysler likely lost some sales to Toyota and Honda.
Ford’s performance in the CARS program mirrors their market share through 2009, and at first blush seems like a solid performance. However, this is only half the story. According to Consumer Reports, 5 of the top 10 “clunkers” traded were Ford products:
Top 10 “Clunkers” Trade-Ins
- Ford Explorer 4WD
- Ford F150 Pickup 2WD
- Jeep Grand Cherokee 4WD
- Jeep Cherokee 4WD
- Ford Explorer 2WD
- Dodge Caravan/Grand Caravan
- Chevrolet Blazer 4WD
- Ford F-150 Pickup 4WD
- Chevrolet C1500 Pickup 2WD
- Ford Windstar
While the fact that so many Fords were traded is a testament to Ford’s phenomenal light truck sales over the past 25 years, these trade-ins represent a net loss for Ford. When the bulk of trades are Ford products and the bulk of new sales are NOT Ford products, that’s a reduction in owner base.
The long-term impact of this reduction in Ford truck owners shouldn’t be ignored. Automotive brand experts always talk about “conquests” – the act of taking a consumer out of a rival automaker’s product – as an essential aspect of boosting a brand. Consumers tend to favor vehicle brands they are already familiar with. So, when consumers trade trading in a Ford for a rival brand, they become more open to buying that rival brand in the future.
Bottom Line: Ford, GM, and Chrysler lost market share and saw their owner base reduced as a result of the CARS program. Toyota and Honda, on the other hand, increased market share and boosted their long-term prospects for increasing market share. We’re guessing this wasn’t the intended result, but that’s how it worked out.
Too bad the American taxpayer is the biggest stockholder in GM and Chrysler.
Filed Under: Auto News
We need to mention now the deficit because of this program with others. When I watched the local news they showed Mike Davidson Ford and Arlington Toyota. Like what was mentioned it was at least 7 out of 10 vehicles on their cars lot were Ford. I did see a good bit of older Rams also. In fact the reporter asked a consumer what he traded in and what he was going for he traded a Dodge Ram, somewhere in the 90’s models, for a Tundra DC. He was just waiting for it to be cleaned and prepped. I just chuckled and I was amazed at how many Fords were in those lots at both dealerships. In actualality these vehicles were gas guzzlers.
Well, at least he was buying an American Built product.
Jeremy what wwas funny was this poster in the Ford dealership stating buy American made vehicle……. I guess they forgot to mention that the F-150 has only 70% american made parts.
I love to ask the idiots who come up to me “Where was your truck built?” they always answer USA so I go wit hthem to find the location of final assembly. sometimes it is America, some times I get Canada or Mexico. I LOVE it when that happens. My reply is always the same, Enjoy that truck, Aye
OR Enjoy that truck, Senior.
One of my millions of gripes about the Cash for clunkiers program is that it should have stipulated only cars that are built IN THE USA can qualify for the rebate. NOt built in Canada, mexico, Korea or Japan. Nothing against any of those contries but they can throw their own Good money after bad at their economy to make themselves feel better about how bad they screwed the pooch. If our POliticians are going to waste money in idiotic ways lets keep that wasted money here and not leaking into everyone elses pockets. The domestics and all the big players in the automotive markey have a vested statke in our economy in the way of plants and other facilities. They are building our economy as much as any other business of the same size. They deserve to sell the produst they build HERE more than a domestic does to sell a car made in Mexico. Before anyone blows an Aorta, I feel the vehicles the domestics and the “Imports” produce here are what we need to be supporting.
Did you hear about the new White House Press Secretary?
HIs name is Ben Dover. He worked in PR for GM for many years. Before that he was part of the Design team at Ford for the Edsel and the electrical system for the F-150. HE has had a long employ of Sticking it to the American People.
Jeremy: Where exactly do you think Toyotas profits go when you, and I, buy a Toyota? Sure there is modest reinvestment in America, but the bulk goes to the Japanese shareholders. The largest shareholder of Toyota is a bank in Japan. I agree that made in America counts and it irks me to no friggin’ end when I look at a “domestic” vehicle and see a 2, 3, or God forbid a K leading the VIN. I also get irked when engine and transmission parts are from other countries, but you should recognize that not all profits stay on shore when buying American made “foreign” cars. That said: Kudos to Toyota for keeping engine, transmission, and 80% of Tundra part sourcing right here in the good ol’ U.S.A.
Okay, now on to the article: Ford was a loser in CARS when their market share remained essentially unchanged? Winner? No, but hardly a loser. It doesn’t matter anyway, sales will now stagnate while inventories pile up this fall. Maybe I can get a sweet discount on a new truck!
I agree that toyota’s profits are going back with them to Japan. But really, most of us won’t see GM or Ford’s profits either. They turn into un-needed bonuses for the big wigs at the companies, they aren’t riding a float in a parade throwing the profit at the by-standers. The most money we can hope to see as an economy is the money being made and paid to Joe The Builder. Right now Toyota is doing the best job of keeping the job’s in the US and IMHO that is most of what Jeremy the Economist was speaking of.
Here is a link of what I wrote in July about the subject of Money going to Japan.
https://www.tundraheadquarters.com/blog/2009/07/03/25-vehicles-less-american-than-the-toyota-tundra/#more-1485
I hate to shatter your world but, DO you think that only Americans own stock in the domestic Car companies? Do only Japanese own stock in Toyota?
I just looked up Toyota’s Shares info. Wow, I couldn’t find ONE Japanese company in the list. All American and European for institutions who hold stocks.
Go figure.
Brian – Ford loses because a lot of people traded in their old Fords for new non-Fords. It’s that whole paragraph about conquests. I know it doesn’t seem like much now, but the long-term dividend of people dumping old Fords for new non-Fords is significant. A lot of those old Fords had lots of life left in them, and that life could have been used to build the Ford brand. Here’s an example: My very first car was a tired old Dodge compact that was remarkably well made. It had few problems, ran like a top, and got me from point to point for $500. I liked the car so much that I decided I liked the Dodge product. Unfortunately, my next car was a 92 Dakota that was so horrible there’s no way I’d buy another Dodge product (OK, might buy a Challenger). The point is that those old Fords COULD have been used to build the brand legend. Now? They’re junk. That’s a net loss for Ford…and one more reason the CARS program has been a failure.
http://www.toyota.co.jp/en/ir/stock/outline.html
Jeremy: Please paste the above link into your browser for stock information on shareholder composition of TMC. Majority of the top 10 are non-U.S. entities. Go figure…
Brian – Great link – thanks for posting. Going to bookmark that one! 🙂 I’m going to respond to your comment in Friday’s blog post – it’s really interesting math I think.
Jason – Looking forward, as usual, to your blog posting. This is a great website!
Wow, I have to spend more than 30 seconds looking stuff up. Yahoo sucks. My bad.
Funny thing is that that doesn’t change my main point. The money stays here. Jason put the nail in that coffin. Until the San Antonio plant is paid off it is a moot point.
The breakdown of WHO owns Toyota was very interesting and it proved my point. Toyota, Gm, Ford, Ect are all globally traded companies. It is no longer an us vs them. a job lost in a Toyota plant here is the same as a job lost in a GM plant here. AMERICANS are profiting from the sales of Tundras and Camrys, just like Canadians were profiting from the sale of Canadian built vehicles.
Aye?
BTW, I am not picking on Canada. I was just making a point.
I have to go throw myself on a sword now for the faux pas in not doing my complete research and trusting Yahoo too much.
Wow, an investigation into the actual sales figures and it looks like the results are actually different that what is being spread around by the DOT and government.
****
“Edmunds’ analysis shows that the government came up with a bizarre way to count Clunker sales and we know now that the DOT counted sales based on the drivetrain in a vehicle, not by its nameplate. For example, the front-wheel drive version of the Ford Escape was counted separately from the all-wheel drive version. As a result, vehicles that only offer one drivetrain came out on the top of the list.”
****
Top Clunker Sales According to Edmunds
1. Ford Focus
2. Ford Escape
3. Honda Civic
4. Ford F-150
5. Toyota Corolla
6. Toyota Camry
7. Honda CR-V
8. Chevrolet Silverado
9. Hyundai Elantra
10. Honda Accord
****
http://www.autoblog.com/2009/0.....n-mcelroy/
Justin – Interesting. Does this change the market share numbers? The market share stats we cited in this report (from 3rd party IBISWorld) were actually more generous than the official market share figures that came out a little later in the day. I think it’s good news for Ford…the fact that so many older Fords were traded might not be that important if the Focus, Escape, and F150 did well.