Automotive News Canada - June 2022 - 28

28
* JUNE 2022
Ottawa not wavering on luxury tax
CONTINUED FROM PAGE 1
vehicle sales will average $666 million
a year.
Internal CADA estimates predict
an even steeper sales decline than the
PBO assessment, Williams said, but the
industry association has not made the
figures public.
" We think [the PBO] numbers
should be scary enough for government
to change course and certainly to look
at jurisdictions where they should provide
exemptions. "
TAX 'REMAINS A PRIORITY'
Despite vocal opposition from CADA
and other groups, Ottawa has not
wavered.
" The government was reelected
on a platform that included a commitment
to bring forward a luxury
tax on yachts, private jets and luxury
cars, and implementing this measure
remains a priority, " said Jessica
Eritou, a spokeswoman for Finance
Minister Chrystia Freeland.
The government packaged the luxury
tax into a budget implementation
bill introduced on Parliament Hill on
April 7.
The new tax has dealers bracing
for lost revenue, rushing to line up
vehicles for customers before Sept. 1
and warning other buyers facing longer
lead times about the impending
levy, said Chris Pfaff, CEO of Pfaff
Automotive Partners.
Along with a flurry of customers
looking to purchase vehicles before the
tax takes effect, Pfaff said his dealership
group, a part of U.S.-based Lithia
Motors Inc., is already facing cancelled
orders for vehicles it will be unable to
source before the deadline.
Pfaff Auto operates luxury and performance-vehicle
dealerships in the
Toronto and Vancouver areas, but
what portion of its business will be
affected by the luxury tax varies by
brand. Every sale at the retailer's two
McLaren stores will fall under the new
levy, Pfaff said, along with a considerable
percentage of sales at its two
Porsche locations. At the company's
BMW and Audi dealerships, he estimated
that 15 to 20 per cent of sales come in
at more than $100,000.
WORKERS WILL SUFFER
Luxury buyers' losses will be limited
to their wallets, Pfaff said, but that is
not the case for those in the industry.
" At the end of the day, it's not the
wealthy that are going to suffer, " he
A considerable percentage of sales
at Pfaff's two Porsche stores will be
subject to the luxury tax, said CEO
Chris Pfaff. FILE PHOTO
said, referencing technicians, salespeople
and other service staff as being
among those who will be " penalized
unfairly. "
For Pfaff and other dealers, the tax
has also prompted reflection about the
future of luxury vehicles in Canada.
One Ontario dealer opted to exit
the luxury segment entirely. In May,
Leavens Automotive Group sold two
dealerships - Porsche of London and
Audi Windsor - to Edmonton-based
AutoCanada Inc. for
an undisclosed price.
Chris Leavens,
Leavens:
Sold two
dealerships,
in part
because of the
proposed new
luxury tax.
FILE PHOTO
head of the dealership
group, gave several
reasons he decided to
sell, and the spectre of
the new tax was one
of them.
" Part of it was timing,
part of it was concerns
about the luxury
tax and Liberal
spending like there's
no tomorrow, " he
said.
After the sale, the
group continues to operate six dealerships
in southwestern Ontario, all of
them nonluxury brands.
IMPLEMENTATION ALSO A CONCERN
How the tax will be rolled out is
another concern for retailers. The
Canada Revenue Agency is working
on a system to administer the tax,
Williams said, but the intricacies will
not be known until after it is signed
into law.
Luxury-vehicle buyers in British
Columbia and Quebec - two provinces
that already have different forms of
a provincial luxury tax on their books
- may be forced to pay up twice. With
both taxes in effect in B.C., luxury sales
could be taxed at a rate of up to 38 per
cent.
CADA and other stakeholders have
been lobbying the federal government
to write in an exemption. But so far,
Finance Canada has pushed forward
on applying the tax across the board,
Williams said. The industry organizaTRANS-CANADA
NEWS
5,000 KILOMETRES OF STORIES
CONTINUED FROM PAGE 3
facility in Halifax, where people
can buy and sell used cars.
" Some dealerships are only
interested in buying vehicles
if they get a sale out of it, "
O'Leary said of his used-only
philosophy. ReCar " treats
every customer the same,
whether they are buying from
us or simply selling us their
vehicle. " - Joe Knycha
Used-vehicle chain ReCar
is expanding throughout the
Maritime provinces.
PHOTO: RECAR
Sport helps teens facing
financial, social barriers
NORTH VANCOUVER -
More at-risk youth in the
Greater Vancouver region
will be introduced to hockey
through a $5,000 donation
from Hyundai Canada to the
Hollyburn Hockey Heroes.
The local program introduces
14- to 18-year-olds who
Hyundai Canada brand
ambassador Jeremy Rupke,
left, presents a $5,000 cheque
to Steve Kirby, youth services
manager at the Hollyburn
Family Services Society.
PHOTO: HYUNDAI CANADA
have been unable to play hockey
because of financial or social
barriers - including mental
health issues and homelessness
- to the sport and the social,
physical and lifestyle benefits it
offers.
tion continues to lobby MPs and senators
as the legislation works its way
through Parliament.
Buyers crossing the U.S. border to
circumvent the luxury tax represent
another challenge for Ottawa.
" Luxury-vehicle buyers are a sophisticated
bunch, " said David Adams,
head of the Global Automakers of
Canada. He expects some buyers to find
their way around the tax, potentially
diverting sales from Canada.
Pfaff warned of a repeated outcome,
saying the market experienced a similar
shift in 2018. When the B.C. government
raised its tax on luxury vehicles,
he said, registrations shifted to Alberta.
Faced with a new hurdle, he said, " people
start thinking creatively " about
how they can get around it.
'BEST TIME' FOR A TAX
The tight supply of vehicles, however,
could work in the government's
favour.
" We have such pent-up demand.
You could argue this is the best time, if
ever, to implement this tax, " Pfaff said
- before adding that the ramifications
for the mid- to long
term are more detrimental.
Likewise,
Andrea
Baldi,
CEO of Automobili
Lamborghini
America, said his
brand's Canadian customers
are not balking
over the luxury
tax.
" There's no hesitation,
nobody is cancelling
or telling us, 'Oh,
my God, 10 per cent
more,' " Baldi said,
pointing to the scarcity
of vehicles.
May sales indicate
vehicle supply problem
could be worsening
CONTINUED FROM PAGE 3
May has historically been the top sales month,
but supply challenges, linked in part to semiconductor
chip shortages, continue to hamper a
rebound.
By comparison, in May 2019 - the last May
before the COVID-19 pandemic began in 2020 -
there were more than 202,000 light vehicles sold in
the month.
DesRosiers said the seasonally adjusted annual
rate of sales for May came in at 1.36 million vehicles.
A
WARNING THAT FINANCING COSTS ARE UP
Andrew King, managing partner of DesRosiers,
said that the rate has continued to fall each month
throughout the year from 1.67 million in January,
indicating that the vehicle supply situation
appears to be worsening.
Baldi: Nobody
is cancelling
[their Lamborghini
order]
or telling us,
'Oh, my God,
10 per cent
more.' "
PHOTO:
LINKEDIN
With vehicle demand outstripping
supply, Lamborghini is expecting no
change in its sales numbers, which
totalled an estimated 336 vehicles in
Canada last year, according to the
Automotive News Research & Data
Center.
As Ottawa presses forward on its
Sept. 1 enactment date, CADA is pledging
that the fight will not end there.
" This is an issue that we're not going
to be dropping one way or the other, "
Williams said. " We'll be holding the
government to account as we go forward
on this. " - ANC
- With files from Jeremy Sinek
Scotiabank on May 31 issued a warning about
interest rates in its Global Auto Report.
" Financing costs have gone up in recent months,
adding to rising affordability challenges in the U.S.
and Canada, " the financial institution said.
The latest data from J.D. Power shows a sharp
rise in new-vehicle transaction prices.
April new-vehicle price inflation was 7.5 per
cent year over year in Canada, and 13.2 per cent in
the United States. May data isn't yet available.
Scotiabank said, " Strong household balance
sheets, along with substantial pent-up demand,
should provide a buffer for these challenges. "
However, " with supply-side factors still limiting
the recovery, the impact of higher ownership costs
on actual sales is likely to be felt when production
catches up. "
Automakers also face soaring production costs,
which will likely be passed on to consumers,
Scotiabank said.
" The producer price growth for motor vehicle
parts has been accelerating in both the U.S. and
Canada, reflecting rising raw material prices and
energy costs. "
Wyant said the current business model of
customers placing factory orders is " profitable
enough, " mitigating carrying costs and advertising
costs because fewer cars are on the lot.
" On lower volume, obviously, margins have
gone up on a per-unit basis incrementally this
year, even versus last year, " he said. " I think all
dealers have adjusted to [the new business model]
because it has been going on for so long. But this
has become our new reality. "
Wyant said it might take six to eight weeks for
an order to arrive. In the meantime, he has just
one week of inventory on the ground.
" Customers now have become much more
accustomed to looking at what we have on the lot
so that they can potentially test drive something
and get a feel for it. And then just going into the
order bank. " - ANC
Hyundai's donation will help
pay for ice time " and create
more opportunity for the community
youth most in need, "
said Steve Kirby, youth services
manager at the Hollyburn
Family Services Society, which
runs the Hockey Heroes program.
- Joe Knycha
Pfaff offering Czinger
hypercar in Canada
VANCOUVER - HYPERCAR
maker Czinger Vehicles is teaming
up with Pfaff Automotive
Partners to sell its hybrid 21C
through the dealership group's
Toronto and Vancouver stores.
Production of the 21C, which
has an asking price of US $2
million, is expected to be limited
to 80 units. The vehicle combines
a mid-mounted twin-turbocharged
2.88-litre V-8 engine
with an 800-volt electric drive to
produce 1,250 peak horsepower.
The 21C will hit 100 km/h from
rest in less than two seconds,
according to the automaker.
The Los Angeles-built cars
are scheduled for initial deliveries
in 2023 and bring together
high-tech design and performance
with exclusivity that
make it perfect for Pfaff's " most
elite clients, " said group CEO
Chris Pfaff. - Steve Mertl
- ANC
The Czinger 21C has an asking
price of roughly US $2 million.
Production is expected to be
limited to 80 units.
SUPPLIED PHOTO
Automotive News Canada - June 2022

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