Drop in the bucket makes a lot of waves
GREG KEENAN
From Thursday's Globe and Mail
Unhappy auto companies that sell subcompact cars are revising marketing plans and sales forecasts now that Ottawa has provided a competitive advantage to Toyota Canada Inc. with environmental provisions in the new federal budget.
The provisions will affect virtually every auto maker in the country, but the most significant impact will come in the subcompact segment of the market, where Toyota's Yaris gets a fraction better fuel economy than cars offered by competitors.
Under the government's plan, Yaris buyers will receive a $1,000 rebate from Ottawa, while people who drive off dealers' lots in competing cars such as the Chevrolet Aveo, Honda Fit, Hyundai Accent, Nissan Versa and Suzuki Swift are out of luck. “What we're concerned about is letting one [model] in a very price-sensitive segment of the market receive the rebate when all the vehicles in that segment of the market are fuel efficient,” Hyundai Auto Canada president Steve Kelleher said yesterday.
Hyundai's Accent uses 6.9 litres of gas to travel 100 kilometres, which means it misses by just four-tenths of a litre in qualifying for the new federal rebate for fuel-efficient vehicles introduced in the budget on Monday.
Buyers of cars that use less than 6.5 litres of gas to go 100 kilometres will receive a rebate of at least $1,000. The Toyota Yaris, rated by Natural Resources Canada at 6.4 litres, qualifies for the $1,000.
The Honda Fit, which has a rating of 6.6 litres for every 100 kilometres, doesn't make the grade.
“The Honda guys are fit to be tied,” a source at another auto maker said yesterday.
Honda Canada Inc. refused to comment.
“We're not going to negotiate with the government through the media,” spokeswoman Sandy Di Felice said.
A rebate of $1,000 is a major advantage in a segment of the market where the vehicles sell in the $12,000 to $14,000 range.
“It's huge,” said one auto industry president.
Mr. Kelleher said he agrees that promoting more fuel-efficient vehicles is a good idea on the part of the federal government.
But trying to compensate for an instant and unexpected $1,000 cost disadvantage on a vehicle that represented 40 per cent of Hyundai's passenger car sales last year is “going to be an uphill battle,” he acknowledged yesterday.
The Accent has one of the best warranties available, he said, at five years or 100,000 kilometres, and offers what he argues is the best content and value in the segment.
“We're really going to have to play up on those attributes and try to hit those attributes home with Canadians,” he said.
At Nissan Canada Inc., president Mark Grimm figures his company will start marketing Versa's larger interior size and superior crash performance.
“That's a lot of money at that end,” Mr. Grimm said of the $1,000 rebate. “You're talking $14,000 cars – $1,000 is a lot of money.”
Ottawa's new “feebate” scheme smacks Nissan at both ends of the market. Versa misses the fuel-efficiency rebate by about six-tenths of a litre of gas. The Pathfinder mid-sized sport utility vehicle is subject to the new federal gas guzzler tax because it uses 13.1 litres to travel 100 kilometres.
The penalty line for what the federal government considers gas guzzlers starts at 13 litres.
“It's a change in the competitive landscape and we're just going to have to adjust and move forward,” Mr. Grimm said.
Industry sources said the fuel-efficiency line of 6.5 litres was chosen because at higher levels, such as seven litres, too many vehicles would be eligible for the credit.
“What we're looking at is fuel-efficient cars,” federal Transport Minister Lawrence Cannon told reporters yesterday when asked why 6.5 litres was established as the benchmark.
“We have to start at some level,” Mr. Cannon said. “We're going to be monitoring this quite closely. We will see how this goes.”
Toyota managing director Stephen Beatty applauded the government again yesterday for taking what he said is necessary action.
“If you take climate change as a real, serious threat, then it isn't about doing something 20 years from now,” Mr. Beatty said after a speech to the Economic Club of Toronto. “We applaud them for taking concerted, comprehensive action.”
He said Toyota did not lobby for the incentive scheme for fuel-efficient cars – most of which are hybrid models – noting that the auto maker brought the Prius to North America in the 1990s without any incentives.
But it stands to benefit immensely. Yaris was the fourth best-selling passenger car in Canada last year with 34,202 sales.
None of the other vehicles eligible for the rebate came close to that level of sales.
