A national scrappage program, along with tax breaks and other incentives, are at the top of the Canadian auto industry’s wish list for a 2021 federal budget that’s being billed as a post-pandemic recovery plan.
After a year that saw new vehicle sales plunge 20 per cent and automakers idled for weeks in a bid to curb the spread of COVID19, the industry says Ottawa can do the most good by paying consumers to trade up.
“That’s front and centre in our request,” said Tim Reuss, president of the Canadian Automobile Dealers Association.
“All of us in the industry, the manufacturers, the suppliers and even the labour unions, the whole automotive industry is aligned behind this proposal,” Reuss said in an interview with Automotive News Canada.
The proposal, which would see Ottawa pay consumers up to $3,000 to trade in a vehicle that is at least 12 years old, is part of a package of tax breaks and other proposals the industry is making in pre-budget submissions to the federal government.
The auto industry is facing a weak start to 2021 as a second wave of COVID19 sweeps the country, leading to more lockdowns and reduced consumer spending, said Brian Kingston, CEO of the Canadian Vehicle Manufacturers’ Association (CVMA).
“What better time than when the [federal] budget comes, probably in March, to unleash a lot of consumer spending and get the auto sector really rolling again,” Kingston said.
The CVMA represents the three largest North American automakers, General Motors Canada, Ford Motor Co. of Canada and FCA Canada Inc.
In discussions with federal officials, Reuss said Ottawa seems receptive to the idea of a scrappage program but wants it aimed at buyers of electric vehicles.
The dealers argue that would severely limit the program’s uptake, Reuss said. Currently, EVs accounts for just three per cent of new vehicle sales in Canada.
Getting consumers into more fuel-efficient vehicles of any kind would help the government achieve its goal of reducing greenhouse gas emissions, Reuss said.
A scrappage program could take up to two million older vehicles off the road while reducing greenhouse gas emissions by up to seven megatonnes, the Global Automakers of Canada (GAC) estimates in its pre-budget document.
“Any new vehicle, potentially even a newer used vehicle, is better,” GAC CEO David Adams said. The industry group represents 15 international automakers, including Honda, Toyota, and BMW.
Throughout the pandemic, dealers have managed to stay in business despite slumping sales thanks to federal government programs, such as the emergency wage subsidy, Reuss acknowledged.
Canadians are sitting on record savings, economists at CIBC noted in a November 2020 report. But Reuss said there’s no guarantee those dollars will be spent buying new vehicles once the economy returns to normal.
The economic recovery is expected to begin in the second half of the year after most Canadians have received the COVID19 vaccine.
The auto industry is also urging the government to delay introducing any new tax increases in its next budget, including on luxury vehicles.
As well, the industry wants the government to raise the deduction limits and prescribed rates for determining the taxable benefits on automobile operating expenses to $1,100 from $800, where it has sat unchanged since 2001.
Among the items no longer topping the industry’s wish list was the CVMA’s request for zero- or low- interest federal loans to automakers to support liquidity during the COVID-19 crisis, Kingston said.
In the early stages of the pandemic, the industry feared it might face a credit crunch.
“So far, largely, that hasn’t happened,” Kingston said.