Automotive News Canada - November 2020 - 4

* N O V E M B E R 2020

What Canada might expect from Biden
'Anything that removes
... monthly tariff threats
from the equation
is good for business'
By JOHN IRWIN

AUTOMOTIVE NEWS CANADA

JOE BIDEN AS THE NEXT
president of the United States will
have far-reaching implications for the
Canadian auto industry on everything
from trade and tariffs to emissions and
electric-vehicle adoption.
The next four years are expected to
be vastly different from the previous
term under U.S.
Donald
NEWS ANALYSIS President
Trump, who has
pursued protectionist trade policies and rolled back vehicle-emissions standards.
How much sway Biden, the 46th
president, will have over U.S. policy
will likely come down to two Senate
races in January that will determine
which party controls the upper house of
Congress. Regardless of how the races
play out, here are three key areas in
which policy could shift, and how they
might affect Canada:

TRADE AND TARIFFS
Biden has said he supports the
new United States-Mexico-Canada
Agreement, which took effect this year
and replaced the North American Free
Trade Agreement. Biden voted for
NAFTA as a senator.
For an industry adjusting to new
rules and looking for consistency in
North American trade policy, this will
likely come as good news.
Still, Biden has signaled he will not
be a free-trade absolutist. According

U.S. President-elect Joe Biden
promises to be less erratic than his
predecessor on trade and tariffs
and is more likely to crack down on
emissions. P H O T O : B L O O M B E R G

to his campaign website, the president-elect would pursue a " national
commitment to Buy American. " And in
2019, he said he would renegotiate the
Trans-Pacific Partnership before committing the United States to rejoining
the pact, which Trump pulled the country out of in 2017.
But Flavio Volpe, president of the
Automotive Parts Manufacturers'
Association, said the industry is hopeful
that a Biden administration would be
less inclined to issue tariffs on Canadian
aluminum, as the United States has
done twice under Trump.
" Anything that removes ... monthly
tariff threats from the equation is good
for business, " Volpe said.

EMISSIONS, FUEL ECONOMY STANDARDS
The Trump administration this
year rolled back U.S. fuel-economy

standards, which now require 1.5-percent annual increases in fuel efficiency
through 2026. That's far weaker than the
five-per-cent increases required under
standards previously set by the Obama
administration, for which Biden served
as vice-president.
Standards could soon rise, however.
In his platform, Biden vowed to develop " a new fuel-economy standard that
goes beyond " those set by the Obama
administration, which targeted average
fuel economy of 54.5 mpg (4.3 l/100 km)
for new cars and light trucks sold in the
2025 model year.
That could mean Canada will not
break away from U.S. fuel-economy
standards to set its own or join standards set by California or other states.
The Trump administration's fuel-economy rollback pressured the federal
government to do
just that in order to
meet its climate targets, even as many
in the auto industry have warned
of the risks of not
having harmonious
fuel-economy regUnder President
ulations between
Donald Trump,
both countries.
the United
States has
pursued
EV ADOPTION
protectionist
Stronger
trade policies
fuel-economy stanand eased up
dards could spur
on emissions
more rapid elecstandards.
tric-vehicle adoption P H O T O :
than under weaker
BLOOMBERG
rules, though many
hurdles remain in a market still dominated by pickups and SUVs. The Biden
campaign has pledged to deploy more
than 500,000 public charging outlets in
the United States by 2030 and said it

U.S. ELECTION RESULTS
* Votes were still being counted as
of press time, but news outlets
including The Associated Press
have projected Democratic nominee Joe Biden to be the next
president of the United States.
(President Donald Trump had not
conceded as of press time.)
* Democrats were projected to
retain control of the House of
Representatives, albeit with a
smaller majority than they currently have.
* It was unclear which party will
control the Senate. The race for
control appeared likely to come
down to two runoff elections in
Georgia on Jan. 5.
* If Democrats win both of the
Georgia races, Biden's party
would likely control the Senate. If
they lose one or both, the GOP
would likely retain control.
would restore a federal tax credit to provide incentives to EV purchases.
Greater EV adoption in the United
States would likely be good news for
Ford Motor Co.'s Oakville, Ont., assembly plant as well as Fiat Chrysler
Automobiles' Windsor, Ont., factory, both of which are slated to receive
major investments in the coming years
for green-vehicle production. Most
Canadian auto production is exported,
and the United States remains a massive auto market. Stronger demand
there could mean more work for
Oakville and Windsor. - ANC
- Reuters contributed to this report.

Transaction prices rise, sales incentives fall
CONTINUED FROM PA GE 1

[truck demand is] still accelerating, " said Robert Karwel,
senior manager of automotive
for J.D. Power Canada.
" Canadians can't get
enough of anything that's utility or pickup. "
The shift " ultimately it's consumer driven, " Karwel said.
He pointed to the late FCA
CEO Sergio Marchionne as
being ahead of the curve when
he killed off the Chrysler 200
and Dodge Dart.
" Sergio was very prescient
when he figured they needed to stop building Darts and
200s and make space for Jeeps, "
Karwel said. " He was sitting on
brands that specialize in trucks
and Jeeps, and they make so
much money on trucks. "
Low interest rates and longterm loans also make it easier for people to afford higher-priced trucks and utility
vehicles.
" The retail performance
of auto is pretty strong, and
that's putting it mildly. As a
dealer, you might be making
more revenue on fewer sales
because prices have gone up, "
Karwel said. " Prices are up

because our data shows us it's
almost entirely because of a
drop in incentive spending. "
October's total new-vehicle sales were down an estimated 2.1
SALES ANALYSIS per cent to
156,095 compared with the
same month last year, according to DesRosiers Automotive
Consultants Inc. (DAC) while
Scotiabank estimated sales
were down 2.5 per cent.

INCENTIVES, PRICES
Of total sales, 53 per cent
were utility vehicles, and 24
per cent of all vehicles sold
were crew-cab pickups.
While the average gross margin on a sedan in October was
$1,400, it was $1,900 on a utility
vehicle and " in the high-$2,000
range " for pickups, Karwel said.
" So, you can sell fewer vehicles because you've richened
the mix. You're still doing fine,
if not better off, as a dealer. "
Overall, the average transaction price for vehicles sold in
Canada for the year, through
September, was $38,000, up
seven per cent over the same
period in 2019, said J.D. Power.
Automakers have pulled

back on incentives in each of
the last four months, Karwel
said.
Of the automakers that continue to report on a monthly basis Toyota, Hyundai, Kia
and Subaru
all posted
gains during
October,
with
Subaru and
Kia generating the biggest increases, up 12 and
19.4 per cent
Karwel:
to 6,319 and
Unsure of how 7,460 sales,
long the good
respectively.
times will
Kia
last: " There's
Canada
a theory that
COO Elias
September
El-Achhab
was the calm
said in a
before the
statement
storm. "
that " 2020
FILE PHOTO
has certainly had its challenges, " but
the arrival of the Seltos subcompact crossover and the
K5 sedan - along with ample
stock overall - has led to
increased sales, he said.
Ken Maisonville, director of national sales

at Hyundai Canada, said the
automaker is " starting off
the fourth quarter stronger
than ever " with the new 2021
Elantra, which began arriving
at dealerships in October. The
updated Santa Fe arrives in
December.
" Despite increased COVIDrelated restrictions in certain
provinces, and supply-chain
shortages of select high-demand
vehicles, the market managed
another strong performance in
October, " Andrew King, managing partner of DAC, said in a
statement.

STRONG ...FOR HOW LONG?
Rebekah Young,
Scotiabank's director of fiscal
provincial economics, said in
an email that several factors
continue to drive auto sales.
" It looks like we have a
combination of some pent-up
demand still working through
the system, possibly some fleet
sales, particularly commercial
fleet coming back online now,
but also potentially new buyers
from pandemic-induced fears.
" We also had the new
Canada Recovery Benefit come
online in the first week of
October which effectively reset

the clock for claimants that
may have exhausted employment benefits under [the
Canadian Emergency Response
Benefit]. "
CERB ended Oct. 3 and
the Canada Recovery Benefit,
which provides $1,000
($900 after taxes) every two
weeks, paid out $1.48 billion to
more than 917,000 individuals
between Oct. 3 and Oct. 30.
Scotiabank said it maintains
its sales forecast outlook of 1.6
million units for 2020, " with
still some potential for volatility in the final stretch. "
It's unknown whether
there is any remaining pent-up
demand, Karwel said.
" There's a theory that
September was the calm before
the storm. "
September sales " were driven by this lease bubble and
that's largely over. "
" All the lease extensions
got pushed out to July, August
and September and they're
now gone, " he said. " And if
that's the case, are we going
to see [sales] numbers fall off
handsomely in November and
December, or we're going to
see consumers come back
[to dealerships]? " - ANC

Automotive News Canada - November 2020

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