The surging Canadian dollar is making U.S. vehicles a bargain for Canadians, prompting General Motors of Canada Ltd. to warn its dealers not to buy new cars or trucks in the United States and try to resell them here.
This is the opposite of the situation in recent years, when the low Canadian dollar caused a tide of vehicles intended for Canadians to flow to American customers.
The dollar has risen to 76.6 cents (U.S.) today, from about 65 cents a year ago. For years, Canadian vehicle prices have been lower than prices for U.S. vehicles on a straight exchange basis.
Now, with the rising dollar giving Canadians a price advantage, auto makers are worried about vehicles flowing north as Canadians seek to buy hot-selling models in the United States, where they're more available and, particularly in the case of some high-end vehicles, considerably less expensive.
Advertisements
"Dealers located in Canada are not permitted to sell new motor vehicles that were not originally manufactured for distribution, sale, registration and primary use in Canada," Marc Comeau, vice-president of sales, service and marketing, warned in a memo to the company's Canadian dealers late last year.
"Furthermore, dealers who participate in the purchase or sale of such vehicles will have their new-vehicle allocation reduced and the opportunity to receive high-demand models will be restricted or discontinued."
GM Canada has seen very few instances of U.S.-allocated vehicles coming into Canada, spokesman Stew Low said yesterday. Nonetheless, he said, the auto maker wanted to remind dealers how seriously it views cross-border trade.
The company considers it important to "protect our distribution channel on both sides of the border."
GM Canada will not pay for warranty repairs on U.S. vehicles, Mr. Comeau added in the memo, unless the vehicles are owned by Americans visiting Canada or relocating here, or the repairs are required because of recalls.
Dealers said other auto makers are also denying coverage under warranties, as the auto makers operating in the United States did when they saw Canadian-allocated vehicles flowing south when the Canadian dollar was trading below 70 cents.
Hummer sport utility vehicles sold by GM Canada dealers, Dodge Durango SUVs sold by DaimlerChrysler Canada Inc. dealers and FX35 and FX45 SUVs sold by the Infiniti division of Nissan Canada Inc. are among the more popular cross-border choices, said Rick Izzo, vice-president and general manager of Superior Auto Sales Inc. in Hamburg, N.Y.
When the Canadian dollar was low compared with the U.S. currency in recent years, Superior was a big importer of Canadian vehicles into the U.S. market, but now it's advertising and selling U.S. Hummers to Canadians over the Internet.
Demand for new vehicles from Canada has virtually dried up in the United States because of the currency situation and moves by auto makers to deny warranty coverage to purchasers of cars originally allocated to Canada, said Richard Izzo, Superior's president.
"We used to sell truckloads" of Canadian vehicles, said Richard Izzo, who calculated the number of Canadian vehicles the company brought into the United States at about 30,000 over the past seven years. "We could have done 60,000," Mr. Izzo said.
A Canadian having trouble buying a hot-selling $73,500 (Canadian) Hummer H2 SUV from a Canadian dealer would save about $7,000 before paying the 7-per-cent GST, a $100 air conditioning tax and excise taxes that apply to vehicles weighing more than 2,007 kilograms.
The price advantage is greatest on such high-end vehicles as Hummers and Chevrolet Corvette sports cars. But some mainstream vehicles, such as the Ford Explorer XLS SUV, cost about the same in both countries once the GST and other costs are factored in.
CROSS-BORDER DEALS
The surging dollar is turning U.S. car lots into bargain centres, as Canadian buyers are able to purchase luxury vehicles for less than they cost at home.
Hummer H2
Canada: $73,500
U.S.: $65,719
Savings: $7,781
Chevrolet Corvette Coupe
Canada: $69,940
U.S.: $58,501
Savings: $11,439
Lexus RX330
Canada: $49,900
U.S.: $46,008
Savings: $3,892
Dodge Durango SLT
Canada: $41,975
U.S.: $37,838
Savings: $4,137
Ford Explorer XLS
Canada: $38,000
U.S.: $35,572
Savings: $3,228
All prices in Canadian dollars, exclusive of GST
SOURCE: MANUFACTURERS' WEBSITES
(Thursday, January 29, 2004, on Page B2)CORRECTION
Manufacturers suggested retail prices for the Ford Explorer XLS four-wheel-drive model start at $37,800 in the U.S. market, compared with $38,800 for the same model in Canada. Incorrect information was published yesterday.
