Red hot auto sales under the U.S. government's "cash for clunkers" incentive began to cool as dealer inventories tightened and showroom traffic showed signs of leveling off from its frantic pace of a week ago.
One industry analysis released on Tuesday forecast a steady decline in "clunker" related business even though the Obama administration and Congress added $2 billion to the program in recent days with hopes of matching the success of its first weeks. Sales during that period topped 250,000 and rebates exceeded $1 billion at least, according to government and industry figures.
"We see that interest dying down," Edmunds.com Senior Analyst Michelle Krebs said in an interview on the consumer auto industry resource group's analysis of buyer intentions. "It's still high. It's better than pre-clunker levels, but it's off its peak."
Krebs said the original $1 billion funding for the program was "very low in relation to the size of the auto market." This, she said, created a "Gold Rush" mentality where consumers stormed dealers at the end of July and in the first days of August to cement discounts with rebate funding running low.
The "clunker" initiative offers rebates of up to $4,500 when consumers trade in older cars for more fuel efficient new ones. Dealers say buyers are trading in mainly sport utilities, pickups and other U.S.-made vehicles for fuel stingy foreign-made passenger cars.
Automakers credited "clunker" trade-ins for boosting July sales to the best annualized rate for 2009, a year in which carmakers have contended with a devastating decline in business. The horrid, recession-driven sales environment contributed to bankruptcies at General Motors Co and Chrysler this spring.
Both have since emerged from Chapter 11 to an uncertain place in the market with the healthier Ford Motor Co rebounding nicely in July from the brutal sales decline and Japanese powerhouses Toyota Motor Co and Honda Motor Co capitalizing strongly on the "clunker" fueled consumer shift to passenger cars.
Tammy Darvish of Darcars Automotive Group said showroom traffic has eased for domestic models since the first week of the month, with inventory running low.
Chrysler shut down production during its bankruptcy in April, and GM slowed output significantly for over two months during its restructuring.
Foreign makers, especially Toyota, are still attracting buyers for historic discounts but traffic has eased slightly for those dealers, too, Darvish said.
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