Yesterday, the US Senate approved a measure that would see an estimated USD $1,553 tax break on the purchase of a new $25K or more vehicle in a bid to assist the increasingly dogpaddling US auto industry. Hey, it worked to get people there buying SUVs…oh, excuse me, “light trucks”. Why won’t it work here, too?
Here’s the thing: people aren’t spending money on cars right now. Instead, they’re making do with the ones they’ve got, repairing anything that needs to be repaired, and going on with their lives as best they can. Now that the Canadian dollar is falling in value against the US dollar, even Canadian auto sales are seeing slippage, and fell 25% in January 2009 alone, thus thrusting us into the same port of call the rest of the world’s currently in.
So what’s my issue with the tax credit being proposed in the US? It’s very simple, really. The tax credit is comparatively small for a comparatively large purchase. There are an awful lot of cars one can get for under $25K, and while I’m not sure about you, I can tell you that if I’m someone with little money, decent credit, and a secure job, I’m going to want to go for economy rather than splashing out $25K just for that measly $1,553 tax credit. I might even buy “American,” too, just for the sake of argument and get myself a nice ’08 Saturn Astra, and help kill a couple of birds with one stone in getting one off their lots. (While Canada’s getting a 2009 Astra, for some reason they’ve not sold terribly well in the US, and they’re going to stick to selling ’08s for the forseeable future.) While it’s true that TransportCanada’s been offering their ecoAUTO rebate from March 2007, it won’t cover ’09 model year vehicles. So while we might have initially led the way, the next step has in fact already been taken, and unfortunately it wasn’t done by us, although various regional Canadian scrappage programs have been a half-step in the right direction.
Instead, it’s been the German government who’ve had a bit more foresight. For starters, they’re offering a much more reasonable 2,500 Euro incentive to German car buyers. But here’s the even more beautiful part, in terms of auto sales: they’re insisting that in order to get the incentive, you must not only purchase a new car; you must get rid of a car that’s more than 9 years old. They’re hurtling towards cleaner air, arguably safer roadways, AND a healthier economy all at the same time! It’s positively brilliant! What’s more, while there is massive debate over their incentives not seeming protectionist in nature in the States, Germany has found that despite offering this massive incentive on all new cars sold within the country, the top six makes in sales are still all German. Granted, that’s also because they’re Germany, but the fact remains. So far, this incentive has been a much-needed shot in the arm for the German economy.
They’re not alone, either. France also introduced such a measure late in 2008, although their incentive is a mere 1,000 Euros. It does, however, include a scrappage clause, and other EC countries have been considering following suit. The Chinese government has had similar measures in place since late last year. Malaysia’s also getting into the act. And now, it’s even coming under consideration in the UK.
I’m sure all these governments aren’t doing this out of the goodness of their hearts, nor necessarily out of some newborn passion for saving the environment. They’re doing it because it works. So why is it that the US is so resistant to learn from the rest of the world? It’s possible that, as such a young country, they’re going through some teenage growing pains. But I, for one, am really hoping their nasty acne problem-spots clear up sooner rather than later.