Low to Middle Income Hardest Hit in CDN Vehicle Prices

The globeandmail reported today that there is a class action lawsuit being launched against automakers and dealers for allegedly charging Canadians 25-35% higher for vehicles sold in Canada when compared to the US. Consumer groups are welcoming the lawsuit.

It is only now through the parity of the dollar that Canadians realize the glaring differences in vehicle prices between Canadian and US dealerships. The article doesn't mention any specific automaker other then Porsche within the article but its suffice to say that not everyone is driving a Porsche nor can they afford one. What about the average joe on a regular salary? I would argue that we are definitely a larger portion of vehicle sales per annum. I set out to find out how much of a difference there actually exists between vehicles here and across the border.

Assumptions:

• Growth since 2002 has averaged -1% in Canada. I assumed no growth in the current fiscal 2007 using 2006 stats from Statistics Canada.


• I used a 2004 study to understand the most popular vehicles purchased in Canada. I assumed this hasn't changed with the exception of Chevrolet that has discontinued the Cavalier and Pontiac Sunfire, and Toyota that has discontinued the Echo. I substituted the Chevrolet Malibu and didn't place another Toyota vehicle as I already had a comparison.


• I also assumed that that the % of vehicles purchased by consumers in Canada by make will remain the same (a large assumption i know but they made the analysis easier given information I was able to obtain). I believe once you see the vehicles individuals were buying in 2004, you will see that those models are still quite popular today.

Findings: If Canadians was to continue to purchase vehicles based on the assumptions above, we would have have paid an extra $888 Million dollars between the vehicles in the table presented here. It is also important to note here that this represents only 11% of all vehicles sold in Canada.

The vehicles depicted here are priced an average of $20,586 in Canada while only $15,772 in the US. Honda and Mazda seem to be the worst offenders (Ford owns Mazda). With vehicles that are priced to attract the low to middle income, it is concerning to think that these automakers are pricing vehicles they way they have.

While many Canadians have realized this some time ago, others are only now starting to realize that the automakers have "pulled the hood over our eyes" (pun intended of course). This isn't small change either and both a public inquiry and a class action lawsuit are definitely warranted under the circumstances. Especially with "ethically" responsible manufacturers like Toyota is promote their One-Price policy. Consumers are now the wiser so beware.

My 2 thoughts......

(Again if you interested, let me know if you want me to share my figures via email)

I agree with Denzel.

There is a great scene in one of the best movies I have ever seen, Training Day starring a very bad-a$$ Denzel Washington. Ethan Hawke walks into the restaurant on his very first day on job with the narcotics division lead by Denzel. Denzel is reading the paper and ignores Ethan's questions for the first minute or so only to stare him when he doesn't get the hint.

"90% of what I read in this paper is bullsh!t. I read it because I like to be entertained. If you are not going to let me read the paper then you entertain me rookie." - Denzel Washington.

From the specific use of words, references to culture, ethnicity, or statements from individuals that really have no relevance to the story one can't help but agree with Denzel's character. The point here is, the media contributes to sensationalizing news. Bad news sells and the worse you can make the story or "spin-it", the more people will be involved.

The thing that enticed me to write this was a recent article by Michael Smyth in the Province date Sept 20th, 2007. As someone with experience in the public sector, I find this article interesting but not for the reasons you might think at first glance. Michael Smyth is trying to illustrate the conundrum that NDP leader Carole James is in where she has to publicly advocate against the Liberals and their spending on Highway Improvements (coined "Black-Top Politics") but still agree that "some" of these improvements are necessary. What does that mean exactly? Does that mean everyone agrees that the improvements are needed but choose to oppose them simply because it because tabled by the opposing party? Shouldn't this be about the constituent.

Reading the article again (with a little guidance from me) you realize that what Smyth has creatively done is imply that highway improvements for the purpose of boosting votes near elections is a given and that we should instead focus on the fact that parties politically can't support each other because of "politics" versus the need of the constituents.

What the real truth here is that regardless of what year the project actually proceeds to construction, much time is put into the analysis and design of the project (a process that can often take several years). The process involves consultation with relevant stakeholders, considers environmental impacts (yes, we all have to comply to environmental standards), and most importantly has to make sense. A strong business case that focuses on the economics of the project: a high Net Present Value, a high Benefit/Cost ratio, strong savings from safety implications (fatality, injury, personal property damage), and it has to make sense to our stakeholders. As of recent you also find a focus on greenhouse gas emissions (in the form of reduction by tonnage).

The real point (yes I'm getting to it) is that a project does not simply show up in an election year unless the people behind the scenes believe its a project that needs to be there. The process isn't flawless, but it is defensible by any traditional economic standards. The Gateway project was created much in the same way has a investment window well beyond the next election. Politics aside, Smythe's article is a bit too presumptions and misleads the reader into an interpretation of highway project delivery that is not founded.

My 2 thoughts anyways...