Canadian Government Investigating Price Discrepancies For New Cars

Every Canadian consumer knows that when it comes to new car prices, we get screwed. Yes, Canada is a small market with higher taxes. It costs more to do business here in part because the high distribution costs can’t be amortized over 300-odd million people. In addition, things like metric instruments further complicate things.

But then there’s the question of why a Toyota RAV4, built two hours outside of Toronto, costs $2,890 less in Hawaii than it does in Canada. Why does an Oshawa-built Camaro demand a $4,685 premium in Canada? Where does BMW get off charging a $19,300 premium in the Great White North for a 535i xDrive, a 38.9 percent increase over the U.S. sticker?

The price discrepancy issue was the subject of a report by Canada’s Senate. Other consumer items like books and sporting goods were also investigated, but cars were a central focus. Interestingly enough, certain vehicles are actually cheaper to buy in Canada; these tend to be compact cars like the Honda Civic and Toyota Corolla, which are popular with Canadians and built in Ontario.

Not so for other segments, like sports cars and luxury vehicles. The report mentions that consumers in Canada looking for these vehicles will pay the price that “the market will bear”. Translation: f**k you, we know we can gouge you, so we’ll do it. Of course, it’s the right of every business to set their own prices and earn a profit, which is precisely what makes it so difficult for the government to do anything about this matter. On the other hand, the compact segment is ultra-competitive in Canada, so it’s in the OEM’s interest to make sure the vehicles are priced competitively. But even mainstream cars like the Dodge Charger, built in a suburb of Toronto, can be as much as 20 percent higher in Canada than in the United States.

Some of the suggestions laid out for lowering vehicle prices, like lowering certain tariffs may help lower the prices, but some experts interviewed in the report suggested that it was doubtful that the savings would be passed onto consumers by the OEMs. For domestic vehicles, it’s hard to imagine the government being able to do anything. Price controls for Camaros would be a farce, especially for a government as committed to free-market principles as the current Conservative government. Ultimately, it’s unlikely that the government will be able to do anything about it, though there’s one “left-field” savior that is just crazy enough to possibly make a difference.

One aspect that got a brief mention was the harmonization of safety standards between Canada and the U.S. Currently, Canada uses the FMVSS standards with a couple minor variations, and the OEMs have long used this compliance as an excuse for high MSRPs. What will really be interesting is if the proposed Canada-EU free trade deal leads to a harmonization between Canada and the UN/ECE standards. One complaint among Canadian car enthusiasts and OEMs has been that Canada’s market tastes have long been aligned with Europe, but the FMVSS-based standards mean that homologating European compact cars has been far too expensive. Meanwhile, Australia, which uses the UN standards and has a comparable market size to Canada, gets all manner of cars that North American enthusiasts can only fantasize about.

Imagine if the EU Free Trade deal opened the floodgates to a whole new swath of product for Canadian consumers? It may not make the Camaro any cheaper, but the amount of available models would increase exponentially, and auto makers would no doubt try and take advantage of the altered regulations to bring better-suited product to Canada. It’s hard to imagine greater overall choice not having any positive effect on vehicle prices. But then again, with things currently as nonsensical as they are, it’s tough to make that call definitively.