Ontario’s automotive sector is bracing for another shock from a government-mandated price freeze, with auto parts suppliers blaming an economic downturn and a slowdown in the auto parts business for the downturn.
The Ontario Manufacturers Association, which represents auto dealerships, said Friday it is working with industry partners to help mitigate the impact of the price freeze.
“The auto industry continues to face a challenging economic environment,” the association said in a statement.
“This is not the first time that a freeze has been imposed on Ontario’s economy.
It was implemented by the Ontario government in April 2017 and imposed a five-year freeze of provincial sales tax, with a five per cent increase for auto parts purchases from 2018.”
We remain concerned about the economic impact on our industry and expect to see additional impacts to the automotive industry,” it added.
The association said it’s been forced to “adjust production and inventory to meet the price hike.”
The Ontario Small Business Association, another industry group, said in its statement that its members have been unable to access enough inventory to make timely sales.
Auto dealerships are also experiencing a decline in sales, with the Association of Ontario Small Automobile Dealers (AOSADCD) estimating that sales are down 19 per cent from a year ago. “
In addition to the cost of buying parts and the difficulty in selling them, many small business owners are dealing with significant job losses, decreased business, reduced business hours, increased business costs and reduced revenue,” it said.
Auto dealerships are also experiencing a decline in sales, with the Association of Ontario Small Automobile Dealers (AOSADCD) estimating that sales are down 19 per cent from a year ago.
“We have been reporting a 20 per cent decrease in sales since the beginning of the year,” said AOSADcd president and CEO Bill Wilson.
“I think that’s not too far away from reality.”
The association’s concerns were echoed by the Canadian Auto Parts Manufacturers Federation, which said sales were down by 20 per one per cent over the last year.
“It’s a very, very difficult year for the industry,” said Gary Smith, president of the Canadian Automotive Parts Manufactors Association.
“If we can’t continue to sell to our customers and maintain the volume that we’ve had, then we’ll be out of business.”
The auto parts industry continues under the weight of its own underperforming business model and our current financial position is not sustainable,” he added.
Ontario has had a freeze on its sales tax since March 2018.
The province has a $3.2-billion budget surplus but still needs $3 billion in provincial funding to maintain a $8-billion deficit.
“So if we want to ensure that people are safe, we need to put in place policies that protect the public from these kinds of risks.” “
At the same time, the province is investing in an auto safety plan that includes a ban on the sale of motorized vehicles,” Premier Kathleen Wynne said during a news conference Friday.
“So if we want to ensure that people are safe, we need to put in place policies that protect the public from these kinds of risks.”
Ontario has already experienced the effects of the auto bailout.
The provincial government raised the cost and duration of a provincial sale tax by 50 per cent in December 2018 and imposed an additional 1.5 per cent sales tax on new vehicle purchases.
The cost of the freeze was increased by $2.5 billion in 2019.