Polk Predicts the Impact of U.S. Government Incentives on Automotive Sales

SOUTHFIELD, Mich., Feb. 13 /PRNewswire/ — Based on detailed analysis and
evaluation of the current economic stimulus package expected to be voted on
today in Washington, Polk analysts predict the current proposed government
incentive will increase U.S. light vehicle sales by 94,000 units in 2009,
providing consumers with an average rebate of $330 for each new vehicle
purchased.

Throughout the negotiations between the House and the Senate over the
economic stimulus plan, Senator Barbara Mikulski (D-MD) spearheaded a
provision to help revive the sagging automotive market. Under the current
proposal, consumers who buy a new vehicle will be able to deduct the sales tax
from their income taxes.

Polk analyzed vehicle prices, sales tax rates, registrations by state, and
income tax brackets to develop its rebate forecast. The sales projection
forecast is based on measuring the efficiency of past incentive programs
across the automotive industry, together with current economic conditions
including limited credit availability, low consumer confidence and a rising
unemployment rate.

A previous proposal also included a deduction for interest expenses on new
vehicle financing. Under that plan, Polk estimates the average rebate would
have been $1,250 per vehicle, and would have provided a sales boost of 359,000
units in the U.S.

“Although the current tax incentive is not as generous as the initial one,
it is nevertheless an encouraging measure. This incentive program could be
even more successful if coupled with additional steps to boost consumer
confidence that would drive more showroom traffic for dealers,” said Lionel
Yron, director of Consulting & Analytics at Polk.

“For example, Hyundai just launched a special program where U.S. consumers
can return their newly purchased vehicle if they lose their income within a
year. As a result, Hyundai’s sales are up 14% in January while overall, the
industry is down 37% compared to January 2008,” explains Yron. “The magnitude
of this gap hints at how much market uncertainties weigh on consumer
spending.”

Another interesting point of comparison is to look at the steps taken by
Western European governments to spur automotive demand in their region. In
Germany, consumers can receive a rebate of 2,500 Euros (equivalent to $3,200
USD) if they scrap their old vehicle when purchasing a new one. According to
Polk estimates, this measure is expected to increase light vehicle sales by
200,000 units for 2009 and should push the German car market just above 3
million units.

“Because of the fixed rebate amount, small car buyers will benefit from a
greater discount. As such, Polk expects to see robust sales gains in this
segment. The scrappage bonus may very well ignite a sustained recovery for the
German car market,” commented Ulrich Winzen, chief analyst at Polk.

About R. L. Polk & Co.

R. L. Polk & Co. is the premier provider of automotive information and
marketing solutions. Polk collects and interprets global data, and provides
extensive automotive business expertise to help customers understand their
market position, identify trends, build brand loyalty, conquest new business
and gain a competitive advantage. Polk helps automotive manufacturers and
dealers, automotive aftermarket companies, finance and insurance companies,
advertising agencies, media companies, consulting organizations, government
agencies and market research firms make good business decisions. A privately
held global firm, Polk is based in Southfield, Mich. with operations in
Australia, Canada, China, France, Germany, Japan, Spain, the United Kingdom
and the United States. For more information, please visit www.polk.com.

SOURCE R. L. Polk & Co.