Industry leaders are pitching a scrappage program as benefiting the environment in hopes of getting federal officials on board with the idea.
“If the government wants to reduce transportation emissions, the best way to do that quickly is through a scrappage program,” said Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association (CVMA), which represents the Detroit Three in Canada. “It’s the only way to get people to very quickly turn in older internal-combustion vehicles.”
The industry has been pressing the federal Liberals to institute a scrappage program as the pandemic took a toll on annual new-vehicle sales, which were down 20 per cent from a year earlier in 2020. The government is expected to release its first budget in two years on April 19.
As far back as April 2020, industry groups including the CVMA, Global Automakers of Canada (GAC) and Canadian Automobile Dealers Association (CADA) were urging the federal government to offer an incentive “in the range of $3,000” per scrapped vehicle.
A program of that size would be about 10 times larger than the government’s previous vehicle scrappage program, Retire Your Ride, which ran from 2009 to 2011. Under that program, consumers who returned a vehicle made in 1995 or earlier were given $300 or other incentives, such as transit passes, resulting in about 120,000 vehicles being scrapped.
“It’s the type of program that can be scaled depending on the ambition of government,” Kingston said. “It’s up to government to decide what size of the program they would want to contemplate.
“Obviously, the larger the incentive, the higher the uptake you’re going to get.”
EV-ONLY CREDIT ‘SUBOPTIMAL’
The government would also decide which new vehicles are eligible for any credit. CADA CEO Tim Reuss said late last year the government had indicated in preliminary discussions that it was considering having the credit apply only to purchases of new electric vehicles.
A spokesman for the federal government declined to comment.
“Such an approach would be “suboptimal,” Reuss said.
“The economics of it don’t necessarily work,” he said. “If you’re scrapping a vehicle that’s 10 years or older, what is that vehicle worth? You’re getting maybe $4,000 for that. But then if you’re buying a brand new EV on the front end, the cheapest one is around $45,000 or $50,000. You wouldn’t get an uptake in the marketplace.”
The CADA is also pitching the government on the environmental impact of expanding credits beyond new EVs to include gas-powered vehicles that are under two years old, Reuss said. Replacing an old vehicle powered by an internal-combustion engine with a newer one, he said, would mean a significant reduction in greenhouse gas emissions, considering the technological advances and rising fuel economy standards of the past decade.
“The beauty of the scrappage program the way that we propose it is that you have both: You have an economic impact, and it fits very well with the environmental agenda, especially with the reduction of greenhouse gases and smog,” Reuss said.