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‘Cash for clunkers’ scheme closer in US

Ban the bombs: US vehicle buyers may be enticed to trade up to more fuel-efficient vehicles in a voucher incentive scheme.

Democrats do deal on subsidy bill for gas-guzzler trade-ins on more efficient cars

General News logo6 May 2009

CONGRESSIONAL Democrats have won support from the Obama administration, unions and General Motors for a ‘cash-for-clunkers’ bill to boost the motor industry while getting rid of many gas guzzlers from US roads.

A deal brokering the proposed legislation was done at the White House by key Democrats on the House Energy Committee on Tuesday, according to CNN.

If passed, the scheme will provide vouchers for up to $US4500 ($A6093) for buyers of new, more fuel-efficient vehicles, boosting car sales in the depressed US market by an estimated one million units a year.

However, there was no word on the thorny issue of whether the program would be restricted to vehicles made in North America or thrown open to all-comers.

So-called ‘scrappage’ schemes are widespread in Europe, where new-car buyers are being offered incentives for aged cars, typically more than nine or 10 years old. In Germany, such a scheme has been wildly successful, boosting sales by 40 per cent in March and 19 per cent in April.

Australian motor dealer groups have called for a similar scheme to boost sales, which were down almost 24 per cent in April. However, the federal government has ruled out following the European lead, preferring to stick with its scheme offering tax breaks for business vehicle buyers.

Although full details of the proposed US scheme have not been made public, it differs from the various European programs by linking rebates directly with fuel economy rather than just the age of vehicles.

According to Automotive News, customers would get a $US3500 ($A4739) voucher if they trade in a passenger car that gets less than 18mpg (13.0L/100km) for a new car getting at least 22mpg (10.7L/100km).

80 center imageLeft: GMC Yukon Denali Hybrid.

Vouchers for $US4500 ($A6093) would be awarded if the new car got at least 10mpg more than their trade-in car. Light-commercial vehicles – including America’s favourite pick-ups and SUVs – are also eligible, but with more complex rules.

There was no immediate word of any vehicle age restriction or minimum ownership period, as in Europe.

United Auto Workers (UAW) president Ron Gettelfinger endorsed the measure. He was quoted in Automotive News as saying: “Congress should act right away on this high-priority measure, to deliver an immediate stimulus to our auto industry and keep Americans working.” GM also threw its support behind the legislation, releasing a statement saying the voucher approach was a huge win for consumers, the economy and the environment.

Michigan Democrat congressman John Dingell – one of six Democrats to broker the agreement on the bill with the Obama administration – said the program would spur consumer demand for both cars and trucks, thereby injecting much-needed cash into ailing domestic auto-makers, while making “meaningful reductions” in energy use by American drivers.

The incentive vouchers are expected to be offered for up to one year.

In Australia, Motor Traders’ Association of NSW chief executive James McCall told GoAuto on April 7 that he was surprised the federal government was not taking the scrappage issue more seriously, given the environmental and safety benefits associated with junking old cars on top of the proven economic stimulus.

“We would have thought this scheme would have appealed to the government because it has a three-pronged affect – economic activity, environment and public safety. I would expect them to take it seriously.

“Every country in the world seems to think that it’s a great idea to stimulate their economy, except us.”

Read more:

Dealers continue scrappage push

Scrappage blow-out costs Germany

Brits scrap over scrappage

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