Changing policies can have huge impact on dealers
A couple of weeks ago I leased a pure battery electric vehicle, or BEV as it is called in the industry lingo.
Was I entirely ready to make the dive into the world of electric vehicles? No, but I had done enough research to know that I would probably be okay with the vehicle as our second family car.
One of the key motivating factors in my perhaps hasty purchase decision was the fact that on June 7th there is an election in Ontario and all polls are pointing to a Progressive Conservative victory under the leadership of Doug Ford.
Mr. Ford has scrapped the “progressive” elements of carbon pricing from Patrick Brown’s “People’s Guarantee” and has threatened to eliminate the province’s cap and trade emissions trading program that provides the province with revenue to undertake other initiatives to address climate change.
While Mr. Ford has not yet declared himself on the generous EV incentive in Ontario, it is not too much of a stretch to think that this program will fall under his knife as well.
This would be very problematic for the automotive industry.
Currently about 95 per cent of all ZEVs are sold in the three key provinces that have incentive programs in place, namely B.C., Ontario and Quebec.
Zero or near Zero emission vehicles are tens of thousands of dollars more costly than their internal combustion counterparts, so without purchase incentives to bring the purchase price of these vehicles closer to price parity, it does not take a rocket scientist to see that these vehicles will languish on dealers’ lots because even people who are ready to purchase an EV will rethink their choice in the face of significantly higher monthly payments.
And where would an Ontario with no climate change plan, or a desire to have one under Premier Ford, leave the Prime Minister who is already running into significant headwinds as he attempts to put in place his national carbon pricing strategy?
For the automotive industry, the feds are also pursuing a National Zero Emission Vehicle Strategy which has been promised for the end of this year — calendar year or fiscal year (end of March 2019) we aren’t sure. No one seems to want to talk about it or take ownership of the file federally, despite convening a lengthy series of rapid fire meetings over the course of a couple of months about a year ago to assist in developing a framework for such a national strategy.
Since then…. Crickets.
While Transport Canada has the lead on this file, Innovation, Science and Economic Development, NRCan and Environment and Climate Change Canada are also involved — as are the provinces. Beyond that, there is not a whole lot that anyone can — or is willing to — tell you about the status of the strategy.
Currently about 95 per cent of all ZEVs are sold in the three key provinces that have incentive programs in place, namely B.C., Ontario and Quebec. Those incentive programs are currently all provincial initiatives. It is true that the federal government has come to the table with funding for infrastructure, which is good, but how about a little more dialogue on the status of the strategy?
At the beginning of April, the U.S. EPA announced that it was repealing the final determination of the so-called mid-term review process that was designed to look at the feasibility of auto companies being able to meet the stringent 2022-2025 GHG emissions regulations.
In the dying days of the Obama administration, the EPA abruptly short circuited the scheduled process and declared that automakers would be able to meet the standards.
In early April, EPA Administrator, Scott Pruitt discarded the “final determination” from 2017 suggesting that more recent and more accurate data has indicated that automakers would not be able to meet the stringent GHG emission standards for 2022-2025 without some form of modification.
This has effectively kick-started a whole new rule-making process in the U.S. and at this point it is unclear what adjustments may be made to the 2022-2025 standards.
Why is this important for Canada and Justin Trudeau’s Liberal government? Because the Canadian GHG regulations are essentially a carbon-copy of the U.S. regulations and even incorporate by reference certain provisions of the Code of Federal Regulations (CFR).
Therefore, we will follow wherever the U.S. goes (even if that’s not where our federal government wants to go) unless the Canadian government proactively intervenes to produce some new and different GHG regulations for Canada.
There are a lot of unknowns at the moment concerning the timing of the new rule-making process in the U.S. and what this will all ultimately mean for Canada.
It is evident that the Trudeau Government thought it was going to be dealing with a different U.S. administration that was more philosophically aligned with it with respect to climate change and few other things — actually, quite a few — as we are finding out.
It will be interesting to see how the federal government reconciles the fact that it was elected on a platform of doing something about climate change while Canada’s largest trading partner seems to be going in a different direction.
One thing that is clear from the automotive industry’s perspective is that holding to the same GHG emissions regulation as the U.S. (because that’s the way they were constructed) but expecting different GHG results/outcomes from industry is fraught with obvious danger.
Danger, that is, unless the government understands that if it wants different results and outcomes that it must be prepared to introduce some significant flexibilities to the North American rule that will facilitate the Canadian industry achieving different results.
There are those who will say, “Well, it doesn’t matter what Trump does because the states, led by California and the Section 177 states will carry the water for the nation on GHG emission standards and Canada can simply align with them.”
Maybe. Perhaps. But, it still doesn’t alleviate the problem the federal government has about having to proactively intervene to create new GHG regulations or amend existing ones to undertake such a change that would allow it to align with California.
There are a lot of unknowns at the moment concerning the timing of the new rule-making process in the U.S. and what this will all ultimately mean for Canada.
At the end of the day, however, at the federal level or the provincial level — shifting political winds have the potential to have a significant impact on the automotive industry in Canada.
