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Hyundai Study Shows ‘Cash for Clunkers’ Bill Would Boost Industry, Economy

In Germany, sales were up 21% in the first month following implementation of a fleet-modernization program in January.

Passage of a proposed fleet-modernization, or “cash for clunkers,” bill has the potential to dramatically spur U.S. automotive sales, a study commissioned by Hyundai Motor America Inc. concludes.

Based on 900 online interviews with new-vehicle intenders, the report reveals at least 38% of potential new-car buyers in the U.S. are aware of the bill snaking its way through Congress.

Spearheaded by Sen. Debbie Stabenow (D-MI) and Sam Brownback, (R-Kan), the legislation would offer credits of up to $4,500 for consumers scrapping vehicles that achieve 18 mpg (13 L/100 km) or less in favor of a new or used car that gets at least 22 mpg (11 L/100 km) or a light truck capable of 18 mpg or more.

Under the proposal, the purchased vehicle must cost less than $45,000 and be no older than an ’04 model.

The study claims 11% of car buyers are delaying purchases until the legislation is either passed or defeated. That could represent as much as 100,000 units in lost sales every month, the report says.

HMA President John Krafcik is calling for quick passage of the bill.

“With sales in the U.S. auto industry forecast at the lowest levels in 26 years, it’s imperative we move forward with this stimulus bill,” he says in a statement. “The auto industry makes up 10% of the consumer portion of the country’s gross domestic product. Any stimulus to the auto industry will make a major improvement in the overall U.S. economy, which remains severely depressed.

“The longer this bill…remains stuck in Congress the greater the pressures placed on all aspects of the U.S. automotive industry – from suppliers to manufacturers to dealers,” Krafcik adds. “We urge Congress to move quickly so that American consumers can benefit from this program during the peak summer selling season.”

Although the proposed $4 billion fleet-modernization program is aimed at replacing low-mileage vehicles with more efficient models, some say it doesn’t go far enough.

An alternative bill put forth by Sen. Dianne Feinstein (D-CA) calls for a $2,500 voucher for older vehicles that get less than 17 mpg (14 L/100 km). To receive the larger payout, the purchased vehicle would need to offer bigger gains in fuel economy.

The U.S. Senate reportedly is prepared to vote on both bills this week.

Similar incentives are working elsewhere. According to industry trade group the Alliance of Automobile Manufacturers, countries that have implemented such programs have experienced dramatic results.

In Germany, sales were up 21% in the first month following implementation of a fleet-modernization program in January, while U.S. deliveries declined 41% in the same period.

Fleet-modernization programs also have been adopted in China, the U.K., Austria, France, Italy, Portugal, Romania and Slovakia.

“In countries that had passed legislation like this there has been significant increases in sales,” says HMA spokesman Chris Hosford. “And in countries where (legislation has) not been passed, sales were off.”

AAM President and CEO Dave McCurdy says the U.S. bill would “direct monies already allocated under the Recovery Act…to consumers.”

The bill “would provide no direct aid to manufacturers and would require no additional appropriation from the government,” he says in a statement. “With just released May auto sales reporting a continued decline towards numbers that haven’t been seen in a quarter century, it is imperative to consumers, dealers, manufacturers and the communities they represent that a fleet-modernization proposal is passed by Congress and quickly signed into law by the president.”

While it’s no surprise auto makers and other industry groups are calling for the quick passage of the bill, there is reason to believe time is of the essence.

Delays in launching similar legislation in Spain, plus the lack of clarity surrounding the government subsidies, is being blamed for that market’s continued less-than-stellar sales results in May.

“From Hyundai’s perspective, we feel very strongly this bill is extremely important not just to the auto industry, but also to the American economy," Hosford says. "We feel every effort should be made to pass this as quickly as possible.”

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