Search Penny Hill Press

Tuesday, November 2, 2010

Accelerated Vehicle Retirement Programs in Japan and South Korea: Background for Congress

Bill Canis  
Specialist in Industrial Organization and Business  

Jeanne J. Grimmett  
Legislative Attorney  

Michaela D. Platzer  
Specialist in Industrial Organization and Business  

Brent D. Yacobucci  
Specialist in Energy and Environmental Policy

In 2009, the United States, Japan, and South Korea, like many industrial countries, initiated accelerated vehicle retirement (AVR) programs. Vehicles manufactured by Japanese and South Korean companies and made both domestically and abroad, were top performers in the U.S. AVR program, also known as the “cash for clunkers” program. However, few U.S.-made vehicles were sold in comparable programs in these two countries, leading to questions about the disparity.

The United States program began in June 2009, when President Obama signed the Consumer Assistance to Recycle and Save (CARS) Act, providing $3 billion to fund a rebate program for consumers who bought certain new, higher mileage vehicles. More than 677,000 new vehicles were purchased through the program. Of these, more than 115,000 were imported from Japan and more than 73,000 from South Korea.

In Japan, an AVR program known as Eco-Car ran from April 2009 until September 2010. In the first iteration of Eco-Car, sales of U.S. and many European cars were not permitted because only vehicles complying with Japan’s “Type Approval” process were eligible. Later, after a protest by the U.S. Trade Representative, the Japanese government modified Eco-Car so that certain U.S. and European vehicles would qualify.

The South Korean government implemented an eight-month program in May 2009 that reduced taxes on new vehicles when a pre-1999 vehicle was turned in. The South Korean program contained no provisions that excluded U.S.-made vehicles, but it did not alter existing South Korean barriers to imported vehicles, which have contributed to the fact that imports occupy only a small share of the Korean market.

Overall, neither Japan nor South Korea imports large numbers of foreign vehicles. The AVR programs do not appear to have changed this pattern. Data on sales of U.S.-made vehicles in the Japanese and South Korea AVR programs have not been released. However, imported motor vehicles accounted for about 4% of total unit sales in both Japan and South Korea in 2009, and the import penetration in both countries declined modestly from 2008. This suggests that the AVR programs reinforced preexisting market conditions in both countries, neither worsening nor improving the competitive position of imported vehicles, including those made in the United States.

Date of Report: October 26, 2010
Number of Pages: 31
Order Number: R41462
Price: $29.95

Follow us on TWITTER at or #CRSreports

Document available via e-mail as a pdf file or in paper form.
To order, e-mail
Penny Hill Press  or call us at 301-253-0881. Provide a Visa, MasterCard, American Express, or Discover card number, expiration date, and name on the card. Indicate whether you want e-mail or postal delivery. Phone orders are preferred and receive priority processing.