Canadians deserve financial incentives to scrap older, higher-Emitting Vehicles



    Auto Dealers and Manufacturers across Canada call for an aggressive
    "scrappage" program to stimulate our economy

    OTTAWA, June 5 /CNW Telbec/ - Canada's auto dealers and manufacturers
have called on the federal government to help strengthen Canadians' confidence
and the Canadian economy by introducing an aggressive "scrappage" program
aimed at stimulating new vehicle sales while removing higher-emitting,
less-safe vehicles from the road. Similar programs have already been
successfully implemented in other countries, including Germany, France and the
United Kingdom.
    "Canada would see immediate economic, environmental and safety benefits
from a program that encourages drivers to replace older vehicles with new
ones," said Canadian Automobile Dealers Association President and CEO Richard
Gauthier. "Germany is a good example where, after implementing a meaningful
and simple scrappage program worth $3,800 (CDN), new vehicle sales increased
by 20% in April and 40% in May. Prior to the introduction of their program,
sales had declined by 14% in January"

    The industry's proposal mirrors the successful German program, including:

    
    - A meaningful consumer incentive towards the purchase of any new light-
      duty vehicle in the amount of $3,500, provided a used vehicle of at
      least 10 years or older is traded-in and scrapped;
    - Operate for a specific duration (e.g. one year), or until program
      funding is spent;
    - Immediately implemented by enhancing the existing 'Retire Your Ride'
      program.

    "A robust scrappage program could increase sales by as much as 100,000
units, which would be a significant benefit to consumers, dealers and their
local economies," said Canadian Vehicle Manufacturers' Association President
Mark Nantais. "Additionally, today's new more fuel efficient vehicles, are 12
times cleaner than a 1993 model year vehicle and contain the most advanced
vehicle safety systems. Removing these vehicles is a triple-win
-Environment-Energy Conservation-Safety - for consumers, governments and the
economy."
    Canadian new vehicle sales have fallen by 20% or over 141,000 units in
2009 compared to the previous year. This drop in sales has impacted sales
revenues by more than $3.5 billion and federal GST collection by at least $175
million.
    "The 3,500 new car dealers who are at the heart of nearly every community
across Canada are struggling to survive this unprecedented economic downturn,"
stated Gauthier. "Given the state of the economy, consumer confidence has been
shaken - we need to give them a great reason to get their older,
higher-polluting vehicles off the road."
    "Other countries have tried complicated programs involving personal and
sales tax adjustments that limit consumer choice and have failed to stimulate
the economy," stated Nantais. "We believe that a simplified scrappage program
that allows Canadians to pick the vehicle that best suits their need is also
best suited to Canada's marketplace."

                               Background Notes

    Consumer Scrappage Incentive Proposal:
    --------------------------------------

    - Meaningful consumer incentive inline with the most successful programs
      globally. Germany's has been the most successful with an incentive of
      2,500 euros ($3,860 CDN). Incentives in the program being finalized in
      the U.S. will range from $3,500 - $4,500 USD ($3,864 - $4,970 CDN).
      Studies suggest that a 10 old vehicle is worth on average $3,500. In
      order to be effective, the incentive offered must be commensurate with
      this average value.
    - Incentive would be for the purchase of any new light-duty vehicle
      provided a used vehicle of at least 10 years or older is traded-in and
      scrapped.
    - Would operate for one year (e.g., July 1, 2009 through June 30, 2010)
      or until program funding ($350 million) is spent.
    - Incentive would be applicable to the purchase of all makes and models
      of vehicles to maximize consumer choice.
    - Would preserve consumer and business choice of vehicles that fit their
      specific needs and requirements.
    - Will provide economic, environmental, energy conservation and vehicle
      safety benefits

    Economic Stimulus:
    ------------------

    - Anticipated the program would drive an additional 100,000 new vehicle
      sales across Canada.
    - Results in $2.5 billion in revenues for dealerships and manufacturers
        - average transaction price of a vehicle in Canada is $25,000
    - Generates $125 million in GST revenues for the federal government and
      tens of millions for provinces through provincial sales taxes.

    Environmental, Energy Conservation and Safety Benefits:
    -------------------------------------------------------

    - Over 19.5 million light-duty vehicles on Canada's roads
        - Roughly 40% or 7 million vehicles of the on-road fleet is at least
          10 years old
    - Reduced Smog-Causing Emissions:
        - One 1987 model year vehicle produces 37 times more smog-causing
          emissions than a 2009 model,
        - One 1993 model year vehicle produces 12 times more smog-causing
          emissions than a 2009 model year vehicle.
    - Improvements in fuel efficiency given newer vehicles with latest
      technologies.
    - Improvements in vehicle safety as new vehicles are equipped with the
      most advanced safety systems, such as electronic stability control.

    Suggested Program Funding:
    --------------------------

    - Estimated cost of the program is $350 million
    - Government can help offset the costs from existing programs and taxes:
        - $92 million from the existing "Retire Your Ride" program
        - $125 million (estimated) in additional GST collected
        - $65 million (estimated) 2009 Green Levy

    Key Statistics:
    ---------------

    - 3,500 new car dealers across Canada
    - Over 140,000 employees at new car dealers
    - 1.57 million new vehicles sold in 2008
        - Anticipated 1.35 million sales in 2009 - loss of 220,000 units
    - $77 billion in retail sales in 2008 - 20% of Canadian total retail
      sales
        - Anticipated drop of $5.5 billion in 2009 due to loss of new vehicle
          sales
    - $3.5 billion in sales tax collected in 2008
        - Anticipated drop of $275 million in 2009 due to loss of new vehicle
          sales

    Positive Effects of Simple Scrappage Programs:
    ----------------------------------------------

    Country    Scrappage Program         Incentive          Sales Results

    Germany    - Scrap a 9 year old      - 2,500 euros      - 40% increase
                 or older vehicle          ($3,863 CDN)       in May
               - Purchase any new                           - 19.4% increase
                 vehicle                                      in April

    France     - Scrap a 10 year old     - 1,000 euros      - 12% increase
                 or older vehicle          ($1,545 CDN)       in May
               - Purchase new vehicle      for vehicles
                 with specific C02         with less than
                 emission requirements     160 g/KM C02
                                           emissions
                                         - Up to 5,000 euros
                                           ($7,727 CDN) for
                                           vehicles with
                                           less than 60 g/KM
                                           C02 emissions

    United     - Scrap a 10 year old     - 2,000 pounds     - Impacted 35,000
    Kingdom      or older vehicle          sterling           sales in May,
               - Purchase any new          ($3,500 CDN)       the first
                 vehicle                                      month,
                                                              accounting for
                                                              one in five
                                                              orders

    United     - TBD - Program           - TBD - $3,500 -   - 33.7% decrease
    States       expected to be            $4,500 USD         in May
                 announced later in        ($3,864 -        - 34.4% decrease
                 June, 2009                $4,970 CDN)        in April

    Canada     - Retire Your Ride -      - $300 toward a    - 16.5% decrease
                 Scrap a 14 year old       bus pass,          in May
                 or older vehicle          bicycle or new   - 17.8% decrease
                                           vehicle            in April


    Key Q&As:
    ---------

    1. The federal government has the Retire Your Ride program in place, why
    is the industry asking for a new program?

    - While an excellent starting point, the Retire Your Ride program as
      currently structured has had limited consumer appeal because offering
      $300 to a consumer is very modest given the cost of purchasing a new
      vehicle. To stimulate new vehicle sales and economic activity in
      Canada, along with making the environmental and safety improvements
      sought under the original program goals, we are recommending the
      government increase the consumer incentive to be in line with
      successful fleet renewal programs in other countries, such as Germany's
      which equates to $3,860.

    2. There are a number of fleet renewal programs globally, including some
    in Canadian provinces, why is the German program the most successful.

    - In the current economic environment, the focus of the program should
      primarily be economic stimulus. Statistical analysis of major
      automotive markets where fleet renewal programs are in place shows that
      the more restrictions that have been placed on the program, in terms of
      which vehicles qualify for the incentives typically based on arbitrary
      fuel economy thresholds, the less successful the programs have been
      both in terms of stimulating economic activity and in improving the
      environmental performance of the on-road fleet.

    3. The auto Industry has already received significant government support,
    why is more needed?"

    - We applaud the government for the steps taken to support the industry
      to date. However, despite the actions take to date, consumer confidence
      continues to slump with vehicles sales down over 20% year to date
      compared to last year. Stimulating consumer vehicle purchases has the
      benefit of increasing overall consumer confidence in the marketplace as
      well as putting money into the local economies.

    4. Do fleet renewal programs simply pull forward vehicle sales and have
    no sustainable impact?

    - For several months, consumers have been delaying vehicle purchases
      because of a lack of confidence in the marketplace. This year sales are
      down roughly 20% compared to 2008. This is having a major impact on
      industry revenues and is seriously impacting the ability to maintain
      operations from the dealerships to the factories. Pulling forward
      vehicle sales would help return sales revenues closer to historical
      norms in a much shorter timeframe than currently expected.

    5. Do all vehicle manufacturers support scrappage programs?

    - All vehicle manufacturers, either directly or through their
      associations, are on record as supporting scrappage programs.

    6. Which countries have introduced scrappage programs?

    - To date there are a variety of programs in existence with a wide range
      of successes in stimulating vehicle sales that are typically tied to
      the size of the incentive and the complexity and restrictions placed on
      the purchase of a new vehicle. We are aware of stimulus programs in
      Austria, France, Germany, Italy, Japan, Luxembourg, Portugal, Romania,
      Slovakia, Spain, the Netherlands, and the United Kingdom. In the United
      States, a program is imminent.
    




For further information:

For further information: Michael Hatch, (613) 230-2079, mhatch@cada.ca;
Michael Powell, (613) 797-7313, mike@impactcanada.com

Organization Profile

Canadian Automobile Dealers Association (CADA)

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Canadian Vehicle Manufacturers' Association (CVMA)

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