Thank you very much, Mr. Chair and committee members.
As you know, the AIAMC is the national trade association that represents the Canadian interests of 14 international automobile manufacturers that manufacture, distribute, and market vehicles in Canada.
As you're all aware, this year has witnessed tumultuous change in the automotive sales and production industries in North America, which has been exacerbated by the global recession. Automotive sales are currently down by 3.5% through the third quarter, which is an improvement compared to the second quarter, in which they were down 18.3%, and the first quarter, in which they were down 21.8%. For comparison's sake, sales in the U.S. were down 27% through the third quarter, despite the infusion of a $2.88 billion “cash for clunkers” program, which was responsible for just over 690,000 vehicle sales in the U.S. over the July and August period in which the program was operational.
The U.S. bankruptcies of both GM and Chrysler, combined with the recession, severely impacted vehicle production in Canada, which is down almost 40% from last year through the end of September.
The production contraction has not affected all companies equally, however, with the production at Toyota and Honda contracting 1.3% and 37.3% respectively, according to automotive news production data, through the end of September. These two manufacturers have a higher percentage of their production sold to Canadians and produce the two top vehicles that were purchased by consumers in the U.S. under their “cash for clunkers” program.
That said, with the recent resurgence of the Canadian dollar, the Canadian automotive market is more susceptible than at any time in the last year to a resurgence of cross-border purchases from the U.S. To encourage Canadians to continue to purchase Canadian vehicles from Canadian dealers, who are still struggling to secure appropriate credit and financing lines, we reiterate the recommendations from our August pre-budget submission as a means of bringing greater parity to Canada and U.S. vehicle pricing.
Our first recommendation was to reduce the finished vehicle tariff on imported passenger vehicles from 6.1% to 2.5% on an applied basis, which is consistent with the tariff on imported passenger vehicles into the United States. This tariff reduction would provide the opportunity for manufacturers to pass on savings of $900 to the consumer, assuming a $25,000 value for duty. Tariff reductions would also assist all manufacturers, not just our own members, in meeting the pending fuel economy regulations, as North American production facilities cannot be converted to the production of new fuel-efficient vehicles in the short term.
The second recommendation we made was to eliminate the green levy excise tax that has been applied on vehicles, with the exception of pickup trucks, that have a combined fuel consumption rating of more than 13.0 litres per 100 kilometres, which was introduced in the 2007 federal budget. While the eco-auto rebate component of the vehicle efficiency initiative introduced in that budget was eliminated at the end of 2008, the green levy continues as an excise tax applied to the vehicle manufacturers. While our members are strong proponents of fuel-efficient vehicles, on a matter of principle it is incongruent that the government would retain one component of the vehicle efficiency initiative while cancelling the incentive component that encourages consumers to make more fuel-efficient choices when purchasing vehicles.
The third recommendation we made was to eliminate the $100 excise tax on air conditioning, which has been in place since the 1970s. When the tax was implemented, at the time very few vehicles had air conditioning and it essentially represented a luxury tax. Currently the vast majority of vehicles sold in Canada are equipped with air conditioners, so it now represents a tax grab.
I'll leave it at that and wait for your questions.
Thank you very much, Mr. Chairman.