Automotive News Canada - April 2023 - 28

28
* APRIL 2023
Luxury levy is taxing patience
Dealers complain
that the law is still
a 'mess' to manage,
but the Canada
Revenue Agency
begs to differ
By STEVE MERTL
VANCOUVER CORRESPONDENT
THE FINANCIAL IMPACT OF
the new federal luxury tax on
automobile retailers is not yet
known, but after two quarters,
the association representing
Canada's franchised dealers
said it has become an adminisTAX
MATH
* The Select Luxury Items Tax
Act imposes a tax above
the Goods and Services
Tax (GST) on new luxury
vehicles and aircraft with a
retail price of $100,000 and
above and on boats costing
more than $250,000.
* For vehicles, the amount
above $100,000 is taxed
at 20 per cent or at 10 per
cent of its full value, whichever
is less. That's on top
of luxury taxes imposed by
some provinces, such as
British Columbia. The luxury
tax is also subject to provincial
tax.
The Jaguar I-Pace electric crossover starts about $100,000,
which is the starting price at which the Select Luxury Items Tax
is applied. PHOTO: JAGUAR LAND ROVER
trative headache.
The tax, launched Sept. 1,
has created uncertainty about
how it should be applied, said
Charles Bernard, lead economist
of the 3,400-member Canadian
Automobile Dealers Association
(CADA).
" The main problem with the
tax has been the administrative
burden that came with it, "
Bernard told Automotive News
Canada.
" It was a mess. When it
came out, even the people at
CRA [Canada Revenue Agency]
didn't know exactly how the
law works. It came in in early
September, and even after
Christmas, people at CRA were
still getting hammered with
questions. "
However, the CRA appeared
to dispute that criticism.
" The CRA received a manageable
number of calls that were
responded [to] in a timely manner, "
the agency wrote in an
emailed statement. The CRA created
a page on its website last
July to address questions and
explain how the tax is applied.
" We met with the industry
and their representatives and
addressed their questions and
concerns, " the CRA said.
REVENUE PROJECTIONS
Bernard's comments came
in the wake of a March report
from the Department of Finance
Canada on the potential economic
impact of the Select
Luxury Items Tax Act.
The report projects that the
vehicle tax will raise an estimated
$55 million for the 2022-23
fiscal year and $450 million by
fiscal 2026-27. An additional $5
million in Goods and Services
Tax (GST) revenue is also
expected because of how the tax
is calculated, the report said.
The luxury tax will result in
an estimated decline in gross
domestic product (GDP) of
between $19 million and $45
million for the automotive sector,
it said.
The report estimated job losses
of 155 to 255 full-time-equivalent
positions, hitting luxury-oriented
dealerships the
hardest. The sectorwide impact
would be 255 to 425 jobs, while
the overall impact on aviation,
boating and automotive ranged
from 400 to 870 lost jobs.
" I think it'll take a few more
months to see if there's been a
real effect on demand, " Bernard
said. " Some dealers, luxury is
only a part of their business. "
But uncertainties have had
a noticeable effect, he said. For
instance, it wasn't clear whether
winter tires for vehicles
ordered before the tax but delivered
after it took effect are subject
to the levy, Bernard said.
Other buyers placed a pretax
order under their company
name but for personal use, then
were stymied on delivery when
they wanted to register it under
their own name.
" A lot of people got scared, "
Bernard said. " Some dealers
were like, let's hold off on the
sale because I'm not sure I'll be
able to tax it properly. "
LACK OF INFORMATION
The confusion was evident to
Mike Beck, general manager of
Audi Edmonton North.
" Information came very late
and was not completely clear
from CRA, " Beck wrote in
an email to Automotive News
Canada. " Fortunately, our manufacturer
was helpful in this
process. "
The additional tax burden
cost his store some sales, but
" with the limitations still on
high-end cars, we still have
Another rumble in battery boomtown
A homegrown mining
company is back after
being forced into creditor
protection in 2019
By DAVID KENNEDY
T ORONTO BUREAU CHIEF
Construction of the new Nemaska
NEMASKA LITHIUM INC. HAS
purchased a site and begun clearing
land in Bécancour, Que., for construction
of what could become Canada's first
processing plant capable of producing
battery-grade lithium for electric
vehicles.
The company - jointly owned
by the provincial investment firm
Investissement Québec and the U.S.based
chemical company Livent Corp.
- announced that it had completed
the purchase of a plot of land from the
Société du parc industriel et portuaire
de Bécancour in early January.
Financial terms of the deal were not
disclosed.
Nemaska plans to build a lithium-hydroxide
conversion plant that would
process lithium-rich spodumene from at
its Whabouchi mine in northern Quebec
into a form ready to be used in EV batteries.
The company began clearing land
Jan. 20 to prepare for construction this
summer.
The milestone is the latest step in a
lithium-hydroxide conversion plant
in Bécancour, Que., is scheduled
to begin this summer and will take
about three years to complete.
RENDERING: NEMASKA
major course correction for the homegrown
mining company. A publicly traded
entity through much of the 2010s,
Nemaska was partway through construction
of its mine and processing
plant when it was forced into creditor
protection in 2019 by cost overruns and
sliding lithium prices.
Investissement Québec and Livent, a
General Motors supplier, committed to
relaunching the company in June 2022
during surging demand for EVs.
BECANCOUR BENEFITS
Nemaska's plant in Bécancour joins a
series of other battery-material projects
that are either proposed or under construction
in the fast-growing battery hub
midway between Montreal and Quebec
City.
Last March, GM and Posco Chemical
announced joint plans for a $500 million
cathode-active-materials plant in the
city. Germany's BASF and miner Vale,
among other chemical processors, are
also advancing projects.
Nemaska's plant would have capacity
to produce 34,000 tonnes of lithium
hydroxide per year. Company spokeswoman
Gabrielle Tellier said this
is below the 40,000-tonne figure that
requires a provincial environmental
impact assessment, but the proposal still
needs environmental signoffs before it
can move forward.
" We are confident that we will be able
to obtain these authorizations as the various
works progress, " Tellier wrote in
an email to Automotive News Canada.
Nemaska expects construction to take
three years.
Work on Nemaska's Whabouchi mine
will be carried out at the same time.
The extraction site, about 300 kilometres
northwest of Chibougamau, Que.,
will provide feedstock for the Bécancour
plant and " be completed in time for the
commissioning of the processing plant, "
Tellier said.
According to Livent's most recent
public disclosure, capital expenses for
the hydroxide plant will run between
US $650 million and $750 million. Work
on the mine will cost as much as $300
million, the company told investors in
November. The sources of funding have
not been determined, according to the
disclosure. - ANC
enough customers that are willing
to pay, " Beck said.
So far, the dealership has not
cut staff, and Beck did not anticipate
any job losses in the near
future. But once vehicle inventory
normalizes, he said, the
tax will have a
more negative
impact as customers
look for
less-expensive
options.
" This will
Beck: The
federal
luxury tax
has cost Audi
Edmonton
North some
sales but,
so far, has
resulted in
no staff cuts.
SUPPLIED
PHOTO
result in lower
sales opportunities
for vehicles
in excess
of $100,000, "
Beck said.
The projections
from
the Finance
Department
were based
on new-vehicle
registration
data from
IHS Markit and sales and pricing
data from Canadian Black
Book. In 2022, 23,914 vehicles
were above the $100,000 price
threshold, and about 75 per cent
of those were priced between
$100,000 and $150,000.
Sales could drop by between
$125 million and $210 million
or by 0.15 per cent and 0.25 per
cent, largely affecting the segment
below $150,000.
Data also showed a spike in
sales in the months ahead of the
tax's taking effect - although
the report said other factors,
such as supply disruptions and
rising interest rates, may have
been at work. - ANC
Transformed Oakville
plant gets a new name
CONTINUED FROM PAGE 3
the smaller footprint.
Ford's renewed Oakville campus will also
house a 407,000-square-foot (38,000-square-metre)
assembly building for battery cells
sourced from its BlueOvalSK facility in
Kentucky, ready to be integrated into the EVs
built onsite.
" When production on the all-new EV begins
here, battery packs will arrive on the assembly
line in minutes, not hours. This kind of
vertical integration drives incredible freight
savings and timing efficiencies, even as we're
delivering EVs at a very high scale, " Nowicki
said.
As part of the plant transformation, the 487acre
(197-hectare) site will be called Oakville
Electric Vehicle Complex.
The Ontario investment is part of Ford's
plan to reach annual output of two million
EVs globally by 2026.
Despite sharing the timeline for the retooling
work, Ford did not disclose what vehicles
the Oakville plant will build. Goodman said
specific product details will be announced
" when the time is right. "
U.S.-based forecasting company
AutoForecast Solutions told Automotive News
Canada in November it expects the plant to
build battery-electric versions of the Ford
Explorer and Lincoln Aviator. In February,
parts supplier Magna International Inc. said
it would be building battery enclosures for the
electric Explorer and Aviator programs destined
for the Oakville plant. - ANC
Automotive News Canada - April 2023

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