New car dealers are facing numerous challenges today – a shortfall of new car products in a post-COVID shutdown economic world, shortage of microchips needed for those new cars, shortfall of car parts, and pressure on used vehicles market availability.
So when provincial and federal taxation imposes further burdens on the industry, it becomes that much more frustrating, says Blair Qualey, president of the New Car Dealers Association of BC (NCDA).
“We are making our case but nobody is listening, paying attention,” said Qualey.
The NCDA contends the B.C. luxury tax on vehicles still kicks in at $55,000, which Qualey says has not been adjusted for inflation and the overall cost of new vehicles with all the new technology ‘bells and whistles.’
With B.C. and Quebec the only provinces to impose such a tax, it leaves open the options for consumers to shop elsewhere for a new vehicle to save money, which not only reduces sales revenue for car dealers but a loss in tax revenue.
“That tax has been in place since the ’90s and never been adjusted. That tax threshold needs to be looked at…the average new vehicle now starts at about $55,000 with all the modern bells and whistles,” he said.
And now the federal government plans to live up to an election campaign promise to impose a 10 per cent federal luxury car tax in September on vehicles over $100,000 in price.
Qualey said the NCDA has made presentations on the potential negative impact of the tax on consumers and his industry – placing B.C. car dealerships and the jobs it creates at risk.
“It will provide an even greater incentive for consumers to take their business elsewhere, greatly impacting the more than 400 new car dealerships in 55 communities across this province, generating $15.6 billion in economic activity, and 27,000 family-supporting jobs,” Qualey said.
“We have made our case to Ottawa. We know it was an election campaign promise but now we are waiting to hear back from the federal folks on what happens come September.”
The imposition of luxury taxes on new vehicles, he says, is placing an unfair burden on new car dealers, citing for example how boats and recreation vehicles don’t face the same taxation.
“We just want a level playing field,” he said.
The NCDA cites a May 26 report by the Parliamentary Budget Officer, suggesting the new tax on luxury vehicles would add $572 million to government coffers through the 2026-27 budget year but reduce sales by $566 million, or 19 per cent, over the same period.
He said the vehicle retail industry is still struggling to recover from the manufacturing slowdowns imposed by COVID-19.
“Everyone on the vehicle manufacturing side put the breaks on production not knowing how things would unfold and it takes a while for that to kick back in,” he said.
“Car manufacturers are trying to catch up to market demand but there are issues with availability of microchips you need for these new vehicles. And manufacturers have to pillage their own parts supply to get more product off the factory floors, and that in turn creates a parts shortage.
“And with interest rates going up, it continues to pile on as that can present car loan challenges for consumers. And we don’t seem to get any relief from the government on some of these challenges.”