Obama's Cash for Clunkers Program Will Help EV's

On March 30th 2009 while giving a speech addressing the auto industry, President Barack Obama shared plans to begin a "Cash for Clunkers" program which would incentivise the trade in of older, less fuel efficient cars, for newer more environmentally friendly ones. Programs like this have gone into effect in Europe and are credited with boosting the auto industry there and promoting cleaner air. In Germany a trade in program offering 2,500-euro for cars older than 9 years went into effect in January 2009 and attracted over 900K applicants within the first week. The program in Germany was launched as part of a stimulus package and is cited for soaring auto sales, up 21% in January and February.

The US bill is currently in need of funding and was introduced in the sanate in January and subsequently the house of representatives in March. It requires car owners to upgrade to a model that was produced in 2004 or later and is 25% more efficient than federal CAFE guidelines. Recently the Obama administration also increased our current CAFE trajectory set out for 2001, adding 1mpg to all vehicle manufacturer fleets (meaning corporations that produce cars will have to add 1mpg of efficiency to their portfolio of vehicles), not a huge jump, but a start at progress.

Before swapping out an old car it is important to consider the dealer trade in value compared to the government voucher which has a max of $7,500. Environmentally speaking, while newer cars may produce less CO2 driving on the road, the production of a new car is responsible for emitting tonnes of greenhouse gases and toxins, especially the upholstery foams and plastics. It is estimated that the efficiency gains from buying a new, more fuel efficient car take three years to net out the harm done by the manufacturing and production of the car itself.

On a lighter note, the timing of this new bill will coincide with the release of several new entry level, consumer priced electric vehicles including the Aptara and Tesla Model S, even Dodge has a few EV's in the pipeline and we're all curious about the Chevy Volt and its much scrutinized maker, GM. Zap and other smaller EV manufacturers already have models on the road that qualify under this bill. Plugins are another huge candidate for the cash for clunkers program and nearly every major auto manufacturer has one due out for release in the next year or two, we're particularly excited about the plugin model of the already extremely efficient BMW Mini.

The Obama Cash for Clunker plan, if passed, would last four years and could take up to one million older US vehicles off the road. These older vehicles might be recycled for raw materials or parted out. In Germany the cars are scrapped and owners are liable to obtain a "death certificate" for their cars to ensure proper handling guidelines have been met. Japan currently has a strict pollution mandate that promotes the trade out of older engines, which are subsequently shipped to lesser developed countries and the US. Overall these types of programs create a trickle down affect that is good for the environment in terms of CO2 but possibly harmful in terms of resource consumption and waste management in LDC's.

Nobody is sure which vehicles will qualify for the Cash for Clunkers program at this time because CAFE standards are not posted on older cars. Many people are theorizing that a master list will be issued including make/model guidelines. For those of you with an itch to buy a new car today, Obama said that the bill would be retroactive from March 30th, 2009 meaning you could still get the voucher later and don't have to wait until making a purchase. The bill hasn't passed through the House yet, so be careful when considering a high dollar purchase. You might want to consider whether the manufacturer you are buying from will even exist in the next few years to support you and your vehicle...

With hybrids and EV's being so expensive, and backordered in many cases, there are a lot of questions as to whether this bill will really be strong enough, financially speaking, to motivate someone who couldn't already afford a nice car to spend tens of thousands of dollars of their own money upgrading. Remember, the voucher only provides "up to" $7,500 and times are tight. WIth the option of buying 2004 or newer this concern is lessened, and the hope is for multiple exhanges moving upstream motivating interest in new EV technology. One person gets a voucher for their F-150, buys a 2005 Tacoma, that owner then upgrades to a Phoenix electric truck.