Referring to an article found in USA Today relating to Chapters 2&4. I have to ask are automakers making the right decision? The article says that as a result of the highly successful Cash-For-Clunkers program the automakers will be ramping up production for the 3rd and 4th quarters of this year. However, the cash for clunkers program only made a short term spike in demand that is now over since the government rebate program has ended, but it seems the automakers don't realize that they could over supply the dealers again who will be left with cars on their lots because demand has fizzled.
The article also states that once this oversupply of vehicles happens dealerships will "require profit killing rebates in order to unload". It seems automakers are jumping the gun in order to save jobs and think demand will return to normal levels. Although automakers are claiming they are only producing enough to replenish lots from the vehicles that were sold during the Cash-For-Clunkers program.
The Cash-For-Clunkers program definitely spiked demand, and has created an incentive for automakers to supply more vehicles, however what is the short term demand as a result of this program? Are many consumers going to be purchasing new cars anytime soon or did those who were thinking about it already buy them? How much of consumers demand will rely on automakers offering hefty rebates again?
Cash-for-clunkers demand has carmakers boosting production