As Robbie Burns might have put it, "The best-laid plans o' mice an' politicians gang aft a-gley." A study conducted by DesRosiers Automotive Consultants and reported in Financial Post reveals that Canada's eco-Auto program has backfired. The legislation was designed to lure Canadians out of their SUVs into hybrids and other more fuel efficient vehicles. Instead of increasing sales of the fuel sippers, buyers are turning to large pickups. The program places an excise tax of up to $4k on SUVs and other gas guzzlers like sports cars. However, because a pickup is a "need" for work rather than a "transportation choice," they're exempt. Sales of small pickups are up 18 percent so far this year, while large truck sales have increased 14 percent. It's only a matter of time– and not much of it– before the loophole cinches shut.
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Politicians….
The simple answer: a gas tax. hat way, customers can still make the choices they want. Small-car drivers that drive very fast would pay extra, just as SUV drivers would.
Just another example where “government planning” simply doesn’t work well, and the power of unintended consequences.
“Centralize planning” is communistic/socialistic, and hasn’t worked in any nation in which it has been tried, under any circumstances, yet western sillivization still is being fed koo-aid about it by all of our governments (read: elitists).
Hasn’t worked in communist China, communist Soviet (dis)Union, East Germany, North Korea, Cuba, western Europe, Canada nor the US and it never will.
When will we ever learn that we have a better system right here and it succeeded beyond all imagination for our grandparents, yet we allow the morons in Washington and state capitals to chuck and jive and lie and manipulate us away from it, as well as the mass media TV network pundits (aka mass insanity)?
While Mr. Desrosiers is a respected analyst in Canada, I do not know if drawing the correlation between increased truck sales and the eco-credit exemption is necessarily correct.
Truck sales have boomed in Canada for a number of reasons, not the least of which is the high levels of prosperity seen in provinces like Alberta, BC, Saskatchewan and Manitoba all of which have been riding the oil and commodity boom wave. These are all traditional truck markets and prosperity, along with new product launches have likely been more the cause of that sales increase.
As for small trucks, a lot of buyers are moving back to smaller units for cost reasons as well as economy reasons. No small pickup truck gets the eco-credit to my knowledge.
The eco-credit is also becoming a major PR disaster for both the government and the major beneficiaries (Honda and Toyota). While eco-penalties are slapped on vehicles at the manufacturer level, the credits are issued to customers after purchase. Needless to say, the government has been glacially slow is getting those credits back to those customers! Dealers that once trumpeted the credit are quietly informing people at the contract stage.
The government will never penalize pickup trucks. Too many political seats to lose (rural seats primarily).
Why not offer incentives instead of penalties? Incentives can be less liberally applied.
This works well in our good ole U.S. of A. We have “incentives” for having children out of wedlock, for not being gainfully employed, for not being able to provide shelter for your children, so on and so forth. And look how popular those program are.
I agree with CSJohnston that the pickup loophole will not be closed anytime soon, as the current Conservative government’s base of support is in Western Canada.
If anything, if the Conservatives were to ever win a majority, I could see this program dying the death of a thousand cuts. I don’t think the true economic conservatives in the party are keen on this program.
AKM, I should note that the gas tax, applied at both the federal and provincial levels, plus the Goods and Services sales Tax on top of these (tax on a tax), are already applied in generous portions here in Canada. Some 50% of the pump price is tax.
@AKM, there already is a substantial gas tax in Canada, roughly 50% of its $1.07/litre (about $4.30/gallon) price.
I honestly think large truck sales are up, simply due to the new offerings from GM and Toyota. People are simply trading there old ones in. Large SUV sales are down, but small SUVs and crossovers continue to sell very well.
I’m sure a few people are buying 4-door pickups instead of SUVs to take advantage of the loophole, but these people probably need such a large vehicle anyway, for towing, etc.
I think the credit/penalty scheme based on vehicle type is just a bad idea, regardless of whether or not it is directly responsible for a surge in sales of large pick-ups.
On the other hand, allowing the free market to work is wishful thinking unless the price of gas reflects the true cost (internalizing the externalities). Since taxing fuel to reflect its true cost to society is politically unpalatable (i.e. complete suicide) it is obviously much easier to apply these credits and penalties to the purchase of new vehicles, as it doesn’t affect existing vehicle owners.
Dean,
It DOES affect current existing owners though. Sure, they may not vote out the pols this way, but it changes their behaviour. I agree with your post, but there is another side to the story which you will likely agree with as well.
In many places, they so heavily tax new vehicles that people are highly incentivised to keep driving their older car rather than buying a new ULEV. The fact that a new Suburban is less polluting than an old Accord gets lost in the political process. The fact that it’s cheaper to fix the old Accord than buy a new one due to the taxes isn’t lost in the family budget process.
Landcrusher,
That is a very valid point, one that the Canadian governemnt had been talking about when they introduced this carrot-and-stick incentive program. There was talk of incentives to get rid of cars older than 9 years old, but for some reason that talk stopped. It probably had something to do with (as stated above) how poorly the cash incentives were being returned to buyers who bought the fuel efficient cars. If I recall right, the $1000 or $2000 you were getting back came off of your taxes at tax time where the $4000 levie was paid at the time of purchase.
You better believe that pickup sales will start to plummet in Canada soon. Canadians are much more price sensitive than American buyers, and as gas prices continue to climb, consumers will be squeezed. A lot of people will avoid buying pickups. Fact is a lot of pickups are used for show, not for work. I see tons of pickups with huge chrome wheels everywhere I go.
It’s been hinted at by previous posters, but part of the reason pickups sales are so healthy is also the robust housing market here in Canada, which has not seen the sort of jitters that the US has.