SEPTEMBER 2009

Clunker bill successfully stimulated economy

The Cash for Clunkers program (CARS) began stimulating the economy even before the first rebate check was cut to a consumer for a new vehicle. “Manufacturers and dealers have spent millions to reach consumers who qualify for the $4,500 government funded rebates,” said Sharon O’Connell from www.CashForClunkersInformation.org.

Big budgets have been activated to implement campaigns targeting clunker consumers who are eligible for the program and the early results suggest the returns will be worth the investment. “We predict that the annualized selling rate for July will exceed 10 million vehicles for the first time this year due to the government program bringing dormant consumers back into the market,” added O’Connell. “We think August could do even better with a million or more sales due to increased demand from the CARS program.”

“The stimulus helps local markets more than national car companies because car dealers stimulate the local economy through their big advertising expenditures, job creation and enormous state tax revenue,” said O’Connell. “A small dealership who sells 100 vehicles a month spends an average of $500 per car in advertising, which is a total of $50,000 that is spent in local advertising.”

Courtesy Chevrolet, one of GM’s largest dealerships in the country, “bought new inventory, hired additional salespeople and increased their ad budget by 88 percent,” said Scott Gruwell. “We spent $200,000 on a targeted direct mail and web campaign to every customer in our market and we launched a regional information portal called www.CashForClunkersDC.com,” said Vince Sheehy, owner of www.Sheehy.com in Washington, DC, Virginia, Maryland and Baltimore. “So far we have sold over 100 vehicles while most dealers in our area are just getting started.”

Since over 80 percent of consumers initiate their vehicle searches online, Automotive Manufacturers and retailers have spent a lot of money online. Ford Motor Company promoted its program on their home page where consumers could link to a website that promoted Ford models that qualify.

The New York Honda Dealers Association initiated an integrated campaign weeks before the final ruling to send a targeted mailer to every qualified clunker owner on the Clunker List in New York while most other brands were focused solely on expensive television advertising. The Association also created a regional website, www.NYCarsProgram.com, to educate New Yorkers about the program.

“Honda is the most popular brand in the New York market and nearly all Hondas qualify for the Cash for Clunkers program, so we launched an interactive website to educate the public,” said Rob Sabbagh, Jr.

www.NYCarsProgram.com provided program information, a clunker calculator and a multi-media consumer tutorial that highlighted the fact that nearly every new Honda qualifies. “You don’t really need a complicated chart to find a qualifying vehicle at a Honda dealer,” said John Mendel, executive vice president of American Honda Motor Co., Inc.

Most of the economic activity generated up to this point has come from early spenders who also appear to be early winners in the race to reach clunker consumers. The winning retailers have been marketing to consumers for weeks while others are just getting started.

The National Highway Traffic Safety Administration and the National Automobile Dealers Association warned dealers against doing transactions before the final rules were announced on July 24th. Despite these warnings, Hyundai and a few dealers took the risk to help consumers get rebates when the law said they could. “Hyundai has attributed 10 percent of July’s sales to the program and some dealers have generated hundreds of incremental sales,” said O’Connell. “We quickly created a program that helped consumers take advantage of the program and it has helped our sales a lot,” said Rick Case, who has six Hyundai stores as a part of one of the most successful automotive groups in the country. “So far all our sales are conquest sales. More than 70 percent of the clunkers were Ford or Chevy trade ins, 71 percent of the clunkers were SUVs, 93 percent had over 100k miles and 71 percent qualified for the $4,500 because SUVs only need a 5 mpg improvement to get the full $4,500 rebate. The average clunker trade in gets 17 mpg and the average new vehicle gets 25 mpg, which is an average of an 8 mpg improvement,” explained Case.