| Did Cash for Clunkers Cost Too Much? October US Census sales estimates are in, so a better analysis of Cash for Clunkers can be done. Popular estimates have ranged from $24,000 per vehicle - done by the economists of Edmunds - to $4,600 by the economists at NADA. The Edmunds analysis means that only 18% of vehicles were incremental, while the NADA estimate means that 92% were incremental.Our analysis, which is done like an irritating MBA brand manager would do, arrives at an estimated cost per vehicle of $7,924, which is offset by average gas savings of up to $15,000 over the life of the vehicle.While it’s understandable that the National Automobile Dealers Association would want to lowball the cost, it’s a mystery why Edmonds would think it’s in the best interest of their readers and industry to overestimate the cost.Both groups should ask themselves; “Have you no shame?” as the biases in their projections are embarrassingly transparent. Below is a chart of their projections without Cash for Clunkers compared to the actual U.S. Census Bureau report on auto sales. Comparisons are made against 2006 to give a stable baseline. The NADA estimate assumes auto sales fall off a cliff, while the Edmunds forecast assumes sales take off without any stimulus. (Note: NADA's is based on their estimate of 1.6 million vehicles in July and August.) To get a reality-based forecast, U.S. Census Retail Sales Excluding Motor Vehicle and Parts Dealers were used as a baseline. The forecast using the retail sales trend is shown in the chart below. Using Retail Sales establishes a trend that appears to continue the pre-Cash for Clunkers trend. Fifty-three percent of the Cash for Clunkers sales were incremental based on the Retail Trend Forecast. Data is available on the Cash for Clunkers site that shows the average rebate was $4,209, resulting in an average cost of $7,924 per incremental vehicle. A number of alternative forecasts were done as cross checks and all showed results in this range.Calculating the savings in gasoline was quite a bit more complicated. Mileage savings are based on the trade-in vehicle as well as the new vehicle. The total pool of new vehicles versus traded vehicles had an average mileage increase of 9.2 miles per gallon. Using the average mileage per year on the vehicles that were traded in of 10,822 miles and an average vehicle life of 13 years gives a savings per vehicle of $8,135 if gas is $2.50 per gallon. Applying this only to the 53% of incremental vehicles results in a benefit of $15,349 per incremental vehicle.A number of factors could reduce the actual savings, so the $15,349 should be taken as a maximum. For example, these vehicles would have been traded in over time, which might reduce the mileage benefit. However, the fact that only 15% of the traded vehicles were cars versus the normal trade-in rate of approximately 50% cars indicates there were significant mileage savings even in this case.As a brand manager analyzing this program, I would say it was a success that generated significant incremental vehicles that resulted in a long-term gasoline savings that may have fully offset the cost of the program. The additional benefits of job creation, which are not included in this analysis, make Cash for Clunkers a definite success.No need for NADA to lowball the numbers to make a case for more stimulus.Disclosures: None for this ArticleComplete Story » seekingalpha.com |
Cool Cash Sets These 5 Stocks Apart Trade Radar Operator submits: Today's screen looks at cool cash or, more precisely, cash plus cash equivalents plus short term investments. These are classic balance sheet entries. The screen actually identifies those stocks whose Cash on Hand, as defined above, is greater than 50% of it's market value. The screen then does a cross-reference with those stocks that just recently joined the TradeRadar Trend Leaders list. The result is in the table below:Complete Story » seekingalpha.com |
Royal Caribbean Cruises Q1 2010 Earnings Call Transcript Royal Caribbean Cruises (RCL)Q1 2010 Earnings CallApril 28, 2010 10:00 am ETComplete Story » seekingalpha.com |
U.S. Car Buyers Are Bullish on the U.S. Economy Mark J. Perry submits: click to enlarge Car sales rebounded in July to the highest level since last August, as consumers purchased more than 12 million new vehicles last month at a seasonally adjusted annual rate (see chart above, data here). On a cumulative year-to-date basis, vehicle sales are 14.7% ahead of last year at this time. Compared to the month of July last year, total vehicle sales are up by 5.1% this year, boosted by a whopping 17.6% increase in light trucks versus last July (see related CD post "The Pickup Indicator"). Complete Story » seekingalpha.com |
Toyota Racks Up Recalls as Automakers Adopt More Proactive Safety Stance Money Morning submits: By Kerri Shannon Toyota Motor Corp. (NYSE: TM) added another set of recalls last Thursday to its rocky year. Toyota announced it needed to repair 1.66 million autos worldwide for brake-fluid leak issues. The newest development brings the total number of Toyota vehicles recalled worldwide in the past year to about 14 million.Complete Story » seekingalpha.com |