“Cash for Clunkers” is about to get 60 times clunkier and not a single bit more effective.
Proving learning from history just isn’t his bag, President Joe Biden has resurrected one of the more infamous bits of Obama-era stimulus failure as part of his electric vehicle program, per an April 7 Washington Examiner report.
I’d say it’s a turbocharged “Cash for Clunkers,” but turbochargers require internal combustion engines.
The proposal is still in the nascent stages, the Examiner reported, but it’s based on Senate Majority Leader Chuck Schumer’s 2019 proposal to spend a whopping $392 billion on vouchers for Americans who traded in a gas-powered vehicle that was at least eight years old and bought an American-made all-electric or plug-in hybrid vehicle.
Under that plan, the vouchers would start at $3,000, with more money being doled out based on the range of the vehicle the consumer bought and if the purchaser is low-income.
“What distinguishes this proposal is not only its scale but also its ability to unite the American environmental movement, the American labor movement and large automakers,” Schumer wrote in a 2019 opinion piece for The New York Times.
“It has already earned the support of climate groups like the Sierra Club, the Natural Resources Defense Council and the League of Conservation Voters; labor unions like the United Automobile Workers and the International Brotherhood of Electrical Workers; and car manufacturers like Ford and General Motors,” the New York Democrat said.
I bet it did, considering the massive scale of the program — over 100 times bigger than the original “Cash for Clunkers,” which clocked in at just $3 billion. At the moment, the money for something on that scale isn’t there, with $174 billion — nearly 60 times the original program’s cost — for electric vehicle infrastructure in the American Jobs Plan at present, according to Utility Dive.
That can certainly change, however, particularly if this is something the Biden administration is determined to pursue.
It’s worth noting the original “Cash for Clunkers” plan — a 2009 post-economic crisis stimulus initiative in which older cars were traded in for $4,500 vouchers that could be spent on more fuel-efficient models — was one of the least effective Obama-era stimulus programs.
The incentives were aimed at getting people into hybrids, then seen as the wave of the future.
According to a 2014 article by MarketWatch, “rather than investing in pricey hybrids, many buyers opted for relatively cheap and small cars, such as Toyota’s Corolla, which was the No. 1 choice during the program, economists with Texas A&M University wrote in ‘Cash for Corollas: When Stimulus Reduces Spending.’ The program ended up cutting [auto] industry revenue by around $3 billion in under a year, the researchers estimated.”
“This highlights how — even over a relatively short period of time — a conflicting policy objective can cause a stimulus program to instead have a contractionary net effect on the targeted industry,” the researchers wrote.
“By lowering the relative price of smaller, more fuel-efficient vehicles, the program induced households to purchase vehicles that cost between $4,000 and $6,000 less than the vehicles they otherwise would have purchased.”
But wasn’t it environmentally friendly? Not really, when you count the fact the cars traded in were junked. Whatever energy savings there were ended up being attenuated by the energy involved in building new cars, creating the raw materials for them and transporting them to factories and dealerships.
Schumer’s plan would do the same thing, mandating dealerships “properly dispose of” the vehicles. It would do it writ large, however, with the senator saying 63 million gas-powered vehicles would be swapped out for EVs. This comes as cars are more reliable than ever, too, with The Associated Press reporting the average car on American roads is nearly 12 years old.
And yet, as per The New York Times’ writeup of Schumer’s plan in 2019, he wants to replace fully one-fifth of those cars.
This assumes, too, the plan would seriously increase EV penetration, which currently sits at about 2 percent in the American market.
“It looks like they are trying to provide stronger incentives for consumers to buy EVs from a lot of different vantage points,” Joshua Linn, an economics professor at the University of Maryland and senior fellow at Resources for the Future, told the Examiner. “Right now, many consumers are pretty far away and not considering EVs, so they’ll need a lot of help.”
While he noted Biden planned to introduce tighter fuel economy standards and force automakers to make more EVs in the years to come, Linn said, “Those standards probably wouldn’t be giving strong support to EVs for a number of years.”
It’s also going to make things a lot more expensive for the same people the administration purports to be helping out: low-income Americans. Most of them buy from the used car market, which would significantly contract if the cars being traded-in under the neo-“Cash for Clunkers” program were scrapped — thus raising prices.
“That increased price falls on lower-income people who buy used cars,” said Kristin Dziczek, senior vice president of research at the Center for Automotive Research.
But there’s one argument left for Biden: We’ve got to beat China.
The president has positioned this part of the infrastructure bill, like so many others, as a bid to “win the EV market” from Beijing, currently the world’s largest producer of electric vehicles.
During his speech to a joint session of Congress on Wednesday, he said there was “no reason why American workers can’t lead the world in the production of electric vehicles and batteries,” according to CNN.
That’s an apples-to-oranges comparison, though. As the South China Morning Post noted, most of the EVs being sold in China are small, cheap and completely unsuited for export to the United States or other advanced economies with things like, say, safety standards or expectations regarding utility or quality.
For instance, here’s the “bestselling” Hongguang Mini EV, complete with an obsequious propaganda tweet by a Chinese Communist Party stan account:
I want one !
Wuling Hongguang Mini EV convertible， starting from 28,800 yuan ($4,432),
— Belt and Road & Beyond (@BeltandRoadDesk) April 25, 2021
Not something any of us are trading in our X-Trails for.
“Cash for Clunkers 2,” if it happens, won’t be environmentally friendly. It won’t create jobs. It won’t be good for the auto industry, and it’s not going to address any EV imbalance between the United States and China, which are competing on different planes.
In short, it’ll be just like the first “Cash for Clunkers,” except in big-budget sequel form.
This is one follow-up Americans should take a miss on.
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