Tuesday, August 25, 2009

Another Wonderful Juxtaposition

I do so love it when two news stories so ironically related appear near one another on the same day. The first example I showed was the Sirius/XM merger and the DaimlerChrysler split.

Today I saw two posts on Autoblog, both addressing the fate of the luxury hybrid segment. The second post discussed the future of the Cadillac Converj concept, saying that GM had given it a new lease on life. The Converj would be a luxury car based on the plug-in hybrid underpinnings of the Chevy Volt. The post closed with the sentence, "While nothing has been officially decided – some inside GM think the Volt should have been a Caddy all along while others don't think that luxury car buyers care about being green – don't count the Converj out yet."

What I found interesting was the absence of mention of the post right before it, which states that, "the new Lexus HS 250h is in such high demand in Japan that Toyota may not be able to provide an adequate supply of the luxury hybrid model here in the States."

Perhaps a little self-awareness on Autoblog's part wouldn't hurt.

Wednesday, August 5, 2009

Clunkers will end with a clunk

The Cash for Clunkers program has been so successful, it ran out of cash in less than a month. We've all heard about this, and the Congress' scramble to re-fund the program. The prospect of the sudden loss of the government-backed incentive has, for me, brought to mind the biggest downside. When the program's done, there'll be a massive drop in sales. The Auto Extremist wrote an excellent column to this effect. In fact, it's likely that the program is just pulling forward sales that would've been delayed until later in the year, a phenomenon I've seen many times in my career as an analyst of the industry.

In my mind, what's needed is a soft landing. While you'll never completely get rid of the aforementioned effects, it may be possible to mitigate the boom and bust that seems inevitable at this point. For this, we'd need a gradual phaseout. Towards the end of the program, decrease the maximum cash from $4,500 to $3,500, then a thousand less each successive month.

While there will still be a significant dropoff right after each decrease, it will allow the manufacturers--and consumers--to gradually ween themselves off the support, and hopefully back to a dynamic in which people are looking past "the deal" toward the product, as Peter mentioned.

Otherwise, the carmakers will have another round of panic from returning monthly sales drops, and it will add to the gloomy economic outlook. Let's get off this cycle, and back to buying cars we really desire.