Rhody Trader

I wrote a while back in Surfing the Cash for Clunkers Market Distortion Wave about how I thought the Cash for Clunkers program could potentially mess things up in the auto demand situation by creating an artificial surge that sucked in future demand. It sounds like that indeed may have happened. Reports are indicating that the post-clunkers sales run rates are actually well below where they were before the program started.

Now, as much as I compared the Clunkers program with the Y2K tech cycle, I don’t think the scope is anywhere near the same. Two things were part of the technology upgrading that went into Y2K preparation. One was necessity. The other was ample money from a strong economy. We have neither of those in this case. The figures suggest the annualized sales rate during the Clunkers run reached about 13.7 million. That’s a big bump, but short-lived and from a low base.

So the bottom line is that while I do think the automakers will see a sales lag for some time to come, it’s probably not going to drag on and on, especially if the economy picks up. They will feel the pain into next year, most likely, but my guess is not beyond mid-year if things continue improving as they have done.

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