The US arm of DaimlerChrysler AG is moving to halt the growing trade in new vehicles across the Canada-US border by announcing it will no longer honour warranties on new vehicles originally sold in Canada as of the 2003 model year.
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“The flow of grey market vehicles from Canada into the US has become a concern for the entire auto industry,” Gary Dilts, senior vice-president of sales for DaimlerChrysler Corporation said in a memorandum to US dealers this week.
“The volumes have been increasing steadily and many competitive dealers and independent outlets are now selling new Chrysler, Jeep and Dodge vehicles directly to consumers.”
The Chrysler group pegs the number of vehicles of all makes heading across the border at 200,000 annually. It figures about 15% of those are its own vehicles that were originally shipped to Canadian dealers for sale to Canadian consumers.
But independent exporters have been taking advantage of the lower price of Canadian-bound vehicles and the low value of the Canadian dollar against its US counterpart to boost sales in the US.
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By GlobalDataPrices for Canadian vehicles can be as much as 25% lower than those in the US when measured in US dollars.
Chrysler spokesman David Elshoff said the difference is about $US6,000 on a mid-range minivan such as a Grand Caravan priced at $US28,000 to $US32,000.
“It’s a bottom-line issue to the company,” he said.
The battle over so-called grey market sales has become a hot one in Canada, with the auto makers seeking to choke off the sales, mainly by clamping down on their Canadian dealers and insisting they stop selling to exporters.
The dealers counter that they take all the measures they can to sell only to Canadians and that they’re not supposed to be police officers for the vehicle makers.
Ford Motor Co. of Canada Ltd., in one of the strongest moves made in this battle, is seeking to terminate the franchise of a dealer in the province of Quebec whom it accuses to selling to exporters.
BMW Canada Inc. insists that buyers of its new Mini Cooper sign rights of first refusal that promise they will offer the cars back to dealers first before they sell them to a third party.
The move by the Chrysler group follows a similar action by Honda Motor Co. Ltd. taken several years ago.
Wesley Lutz, owner of Extreme Dodge in Jackson, Michigan, applauded the move.
“It’s an issue that needs to be resolved,” Lutz said. He added it was obvious there was a problem when the Chrysler PT Cruiser made its debut a few years ago.
“I have a high-end used car dealer near me,” he said. “He had PT Cruisers before the Plymouth dealer did. That’s not good.’”
General Motors Corp. made a similar move in 1999 to void warranties on Canadian-bound vehicles that ended up in the US market. But it restored the warranties three weeks later in the face of consumer complaints, industry sources said.
