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We Want Lower Car Prices, Not Just Incentives

By David Booth, National Post

I wonder when they'll hit the panic button. And, believe you me, they will. There will simply be no choice.

They, of course, are the automakers, and the panic button of which I speak is the pricing of automobiles in Canada, which, according to my calculations, gets ever more wonky by the day.

Wasn't it just last Tuesday that the dollar finally hit parity after three decades of subservience to the buck God no longer trusts? Now, it's flirting with a buck-five and everybody's talking about when, not if, the loonie will be worth 1.1 American greenbacks.

And that just widens the already immense gulf between the prices of cars here in Canada and the cost of the same items in the United States. At $1.10, for instance, a Canadian Corvette Z06 costs $100,870 in American dollars, a premium of $29,870 over the same car in the United States.

Just for reference, that means that if you bought your new Corvette in the United States -- Miami, for instance -- you would have enough left over from the purchase of your spanking new Z06 to buy a base 2008 Chevrolet Malibu (a great car, by the way), stay at the ritzy Delano Hotel for a week basking in South Beach sunshine, gorge on Cristal champagne every day and still have enough to pay somebody to drive the car back for you because all our new-found economic strength has made you as spoiled as, well, Americans abroad.

What have manufacturers done about that? So far, they've worked hard on their "transaction" pricing, the amount that is actually spent on the car purchase. Noting that almost 80% of Canadians finance their cars (making, in their minds, any comparison of prices meaningless), many Canadian auto distributors have announced special incentives/ finance rates/combinations thereof to make the actual cost of ownership equal on both sides of the border. General Motors, for instance, says that for base Malibus, the lease rate in Canada is actually $2 a month cheaper than in the U.S.

Nonetheless, I think automakers are missing the point. While it's all well and good to be offering these healthy incentives and cheap financing, Canadians are demanding that the actual prices be lowered. It goes beyond the simple cost of a car.

Call it our collective feeling of second-class status compared with our elephantine neighbour or our socialistic tendency to mistrust large corporations, but, for a large portion of the population, these half-measures are not enough.

"They don't think of them as humans but only as consumers," says Pamela Divinsky, vice-president of J. Walter Thompson's corporate social responsibility division, ETHOS, noting that there's more going on than the simple transaction of money.

What has me truly confused, however, is why the domestic manufacturers don't see this as an opportunity rather than a catastrophe. European and Asian manufacturers are somewhat hamstrung in lowering their Canadian pricing by their relatively strong currencies, but the Big Three could easily drop their prices and still be well in the black. Even, for instance, if General Motors dropped that Z06's price by half the difference between U.S. and Canadian pricing, GM Canada would still be making scads more profit than its U.S. arm. And an $81,340 Z06 is looking like an bigger bargain against an even more overpriced 911. Applying the same splitting-the-difference policy to Ford's Fusion SEL V6 would see its price reduced to $25,775, giving it a $5,000 price advantage over a similarly equipped Toyota Camry and eliminating the need for all those new incentives.