Big Three auto makers will take a hit from budget incentives All for the sake of the "green vote", pure politics
Canadian PressTORONTO — Federal incentives to encourage a shift from gas-guzzling SUVs to fuel-efficient “green cars” could hurt struggling North American auto makers by keeping some drivers out of the marketplace without significantly boosting sales of gasoline-electric hybrid cars, industry watchers say.
Auto analyst Dennis DesRosiers said Tuesday the government should be concerned with how auto makers might react to its budget plan, which favours hybrid cars with a rebate of up to $2,000 on the purchase but puts a $4,000 tax on SUVs and other vehicles that use high amounts of fuel.
“If I was General Motors, Ford and Chrysler, I'd be real (upset). Right now, these companies are in real sensitive mode in terms of their very survival,” Mr. DesRosiers said.
“Key decisions are being made in their head office boardrooms in terms of plans of what to keep open, what plants to close and where to put their investments. And what does the federal government do? They send a bomb — a missile — into these boardrooms saying we're going to put a $4,000 tax on your most profitable vehicles,” he said. Mr. DesRosiers suggested consumers will find other ways to acquire an SUV, if they really want to make the purchase, such as buying used — an area that isn't covered by the incentive plan — or travelling stateside to make a purchase.
The taxes “don't deter consumers from buying these kinds of vehicles, mainly because you can drive a large SUV through the loopholes in them.”
Ontario Premier Dalton McGuinty applauded the hybrid incentive, saying manufacturers have to help protect the environment by curbing greenhouse gas emissions, despite any short-term effect on the province's huge manufacturing operations.
Ontario and some other provinces already have existing incentive programs that double rebates when a hybrid vehicle is bought.
Mr. McGuinty said he wants to work with the Canadian auto industry — heavily concentrated in Ontario — so it is producing products and models that are more environmentally friendly.
Toyota Motor Corp., which has been a long-time supporter of hybrid vehicles but doesn't plan to make any in Canada, also lauded the incentives plan.
“Toyota has long believed that the global automotive industry must take real measures to make things better for the planet,” Toyota Canada managing director Stephen Beatty said in a release.
“This is why we have invested so heavily in fuel-efficient engines, smaller vehicles, emission-fighting systems and advanced technology such as our industry leading gasoline-electric hybrids.”
Toyota plans to open a new plant in Woodstock, Ont., next year to make the RAV-4 mini sports utility vehicle.
Chris Johnsen, Canadian automotive leader at Deloitte & Touche consultants, said auto makers were unlikely to shift hybrid manufacturing to Canada in response to the new incentives. He added that he's skeptical of how much impact the entire program will have on consumer spending.
“The incentive, while it certainly causes people to take notice, won't shift consumer buying,” he said.
“A consumer up in northern Ontario, for example, would have very little benefit buying a hybrid. Where they make a huge impact is in big-city driving, stop-and-go in places like Vancouver or Montreal.”
Mr. DesRosiers added that even if the tax incentives did affect sales, the Canadian SUV market is too small to make a lasting impression on climate change.
“I respect that people who buy one of those big gas-guzzlers potentially should be a target, but last year in Canada there were 15,000 (SUVs sold) and that's it.”
He said a major effect would be felt if Canadians started to sneak through the taxation loopholes, sending auto sales downward.
