Thank you, Mr. Chairman.
The Association of International Automobile Manufacturers of Canada is a national trade association that represents the Canadian interests of 14 international automobile manufacturers that manufacture, distribute, and market vehicles in Canada. Our members directly and indirectly employ some 77,000 Canadians, and through the third quarter of 2010, our members’ share of the new light-duty vehicle market stands at 53.3%. Additionally, over 52% of the AIAMC's collective vehicle sales in 2009 were produced in the NAFTA region.
This year began with optimism that the Canadian economy had weathered the global financial crisis better than most nations and was poised for solid economic growth throughout 2010. However, economic optimism in Canada has waned amid ongoing global financial challenges, stubborn unemployment rates, and higher consumer debt levels. The current challenges are reflected in consumer confidence levels as well, which, according to the Conference Board of Canada's consumer confidence index, has dropped from 96.6 in January to 78.1 in September. There is essentially a direct correlation between consumer confidence levels and new vehicle sales.
Through the first quarter of this year, vehicle sales were up 15% on a year-to-date basis, but this growth over last year diminished to 9.1% through the second quarter and receded further to 7.2% through the third quarter. Total sales for 2010 are expected to rebound to somewhere between 1.55 and 1.58 million units.
With respect to the Canadian vehicle manufacturing component of the automotive industry in Canada and our economy in general, given our proximity to the United States and the integration of our economy, the uneven and tepid economic recovery in the U.S. continues to weigh down things here. While vehicle production at the beginning of the year had been anticipated to increase 30% for 2010, even if that is achieved it needs to be remembered that last year Canada produced just 1.5 million vehicles and has not produced fewer vehicles since 1975. Currently, through the third quarter, vehicle production is up 17% in Canada.
With a dollar that has hovered much closer to parity with the U.S. dollar this year than last, we have seen a predictable surge in vehicle importations from the United States. Through the end of the third quarter, figures from the registrar of imported vehicles reveal more vehicles have already been imported into Canada from the U.S. in 2010 than in the whole year of 2009. Against this backdrop, the AIAMC makes the following recommendations to the standing committee.
In the face of a record deficit and a myriad of other demands on public resources, we appreciate that our first recommendation may be better suited to be phased in over a two- to three-year period. The goal of all our recommendations is to address unintended competitive vagaries, to reduce unnecessary cost in the Canadian automotive market, and to encourage Canadians to continue to purchase vehicles from Canadian dealers to support the Canadian automotive industry.
Our first recommendation is to reduce finished vehicle tariffs on imported passenger vehicles from 6.1% to 2.5% on an applied basis, which is consistent with the tariff on imported passenger cars in the United States. This would provide the opportunity for manufacturers to pass on savings of approximately $900 to the consumer and will also assist manufacturers in meeting the pending GHG regulations as North American production facilities cannot be converted to the production of smaller, fuel-efficient vehicles in the short term. Tariff reduction to the level of the U.S. rate is consistent with other regulatory harmonization initiatives being undertaken within the industry on both safety standards and emission standards in recognition of the integrated nature of the industry. This initiative also supports the purchase of vehicles through Canadian dealers. A lower common tariff rate with the United States goes some way to mitigating competitive distortions in the marketplace that arise as a result of bilateral trade deals.
Our second recommendation would be to reallocate a portion of the existing $100 excise tax that has been placed on motor vehicle air conditioners since the 1970s. Currently 99% of cars and trucks sold in Canada are equipped with air conditioners. This was not the case when the tax was imposed in the seventies, and it was viewed as a luxury at that time. Right now air conditioning is essentially viewed as a necessity, and that tax represents a significant tax grab.
Moreover Environment Canada has initiated consultations on an extended producer responsibility regime for managing end-of-life ozone-depleting substances, which would duplicate the existence of provincial and territorial regulations to address this same issue. While proper quantification of mobile air conditioners' contribution to the problem and the appropriate cost-benefit analysis of additional regulation for the auto sector have yet to be undertaken, it’s unreasonable for an additional levy to be placed on mobile air conditioners when the current excise tax generates approximately $150 million annually.
Should this initiative by Environment Canada to supplement provincial regulations for vehicle-related air conditioning systems move forward, we recommend that it be funded through the revenues currently collected and not by adding a costly new and duplicative regulatory regime.
Our third recommendation would be to eliminate the green levy excise tax that has been applied on vehicles that was introduced in the 2007 federal budget.
While the members of the AMC are strong proponents of fuel-efficient vehicles, on a matter of principle it's incongruent that the government would retain one component of the vehicle efficiency initiative while cancelling the incentive component of the initiative that encourages consumers to make more fuel-efficient vehicle choices.
Thank you very much.