March 29, 2007

Penalties on gas guzzlers will have small impact

The announcement on Monday of the new federal ecoAUTO Rebate Program is important news for the automotive industry and for consumers.

The program aims to reward consumers who purchase energy-efficient vehicles and to penalize those who buy fuel-inefficient vehicles.

Rebates from $1,000 to $2,000 would be offered to those who buy fuel-efficient vehicles, and tax levies of between $1,000 and $4,000 would be applied to those who buy gas-guzzlers.

According to the federal website (, only vehicles appearing on the list that are purchased or leased (12 months or more) on or after March 20, 2007 are eligible.

If you buy or lease a new 2006 model that has never been registered for use in Canada, on or after March 20, and it meets the program fuel consumption criteria, it may be eligible. A list of 2006 eligible vehicles will be posted shortly on the government website.

In the meantime, consumers should keep a copy of their proof of purchase or a copy of the long-term lease agreement (12 months or longer) of the vehicle.

I have a mixed reaction toward the program. I would have liked to have seen a broad tax savings initiative for all Canadians, instead of a program that targets a small segment of the population.

I think that penalties applied to gas guzzlers will have a negligible impact on retail automotive sales, because the federal government is eliminating the excise tax on heavy vehicles. This excise tax increases the cost of a luxury vehicle or full-size SUV by $500 to $700.

Besides, gas guzzlers make up only about 5 per cent of new vehicle sales in Canada.

Will the rebate program have any impact at the retail level? No doubt, it will influence some car-buying decisions, simply because of the economics involved ($4,000 is a lot of extra money to have to pay).

Overall, I don't think that it will deter people from buying the vehicles that they really want to buy.

Clearly, passenger vans, sport utility vehicles and crossover vehicles have found a place in the market. If large, gas guzzling vehicles are available, if people want them and can afford them, then these vehicles will continue to sell, incentives or no incentives.

On the other hand, the program is a move in the right direction toward addressing the issue of global warming and air pollution. Let's face it, the green movement is here to stay, and these kinds of programs and initiatives are only going to become more prevalent.

At the end of the day, should this tax rebate/levy influence your car-buying decision? I think that it should factor into your decision, but that it shouldn't be your sole criterion for buying one make over another.

How a vehicle handles, where you plan on driving it, the cost of the vehicle, design features, styling – these are considerations that consumers should base their car-buying decisions on.

My own feeling is that the federal government could be doing more to embrace climate change and the environment. Part of me feels that this program is nothing but window dressing for a coming federal election.

If the federal government wanted to make a significant impact on global warming, it should continue working closely with automakers in developing alternative fuel technologies.

In the past few months, the federal government has announced some encouraging initiatives designed to fight global warming and air pollution.

In February, it pledged up to $36 million (as part of its ecoTechnology for Vehicles Program) in funding to test and promote environmentally friendly vehicle technologies and to build partnerships with the automotive industry.

Our industry is healthy today, but the world is changing fast. In his best-selling book, The World is Flat, Thomas Friedman argues that governments (and companies) need to adjust to a new world order, where jobs and capital are shifting from one country to another, right before our eyes.

If we want to secure a bright future for the car industry in Canada, the federal government must continue to devise broad-based and meaningful strategies – as opposed to taxing owners of gas guzzlers.

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