Saturday, 8 August 2009

Cash for Clunkers

RARE is the policy innovation that catches on so fast. Indeed, “cash-for-clunkers” is the policy of offering a subsidy to car owners to trade in their old gas-guzzler for a new, less thirsty model. The American scheme started out with $1 billion to pay for rebates of $3,500 or $4,500, depending on the difference in fuel efficiency between the old car and the new. It has burned through this in its first month, so on July 31st the House of Representatives voted to give it a further $2 billion. Germany’s €5 billion ($7.2 billion) scrappage scheme has also proved highly popular: within two months of its start, in February, 1.2m motorists had applied, twice the expected number.

Ford reported its sales rose 2% in July. BusinessWeek Detroit correspondent David Kiley reports on which models are doing well and the impact of the incentive program on sales.

BusinessWeek Senior Writer John Carey on whether the cash-for-clunkers program will result in lower consumption of gas.

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