Hyundai Canada is offering up to $1,000 for clunkers

Hyundai Canada announced on Wednesday that it will offer up to $1,000 as an incentive for consumers to scrap their old cars for new, fuel-efficient Hyundai vehicles.

The scrappage incentive is the first of its kind to be offered by an individual company in Canada, and the South Korean automaker said it will "top up" incentives offered under the federal government’s existing Retire Your Ride program.

The company said consumers will receive between $500 and $1,000 in savings, depending on the vehicle, if they trade in an old car for a new Hyundai.

Hyundai Canada president and CEO Steve Kelleher touted the environmental benefits of the program over its ability to generate sales, although larger government-run scrappage programs have been very successful in boosting sales in an industry that has been hit particularly hard by the recession and slumping consumer confidence.

"From our standpoint anyways, it’s not so much an initiative to increase our sales. Our sales are doing really, really well this year," Kelleher said in an interview.

"We’re looking for a good platform to launch our corporate social responsibility initiatives."

According to data from DesRosiers Automotive Consultants, Hyundai sold 10,488 vehicles in Canada in July, a 37.8 per cent increase from a year earlier, putting it in sixth place in terms of Canadian market share.

Hyundai Canada is a subsidiary of South Korea’s largest automaker and industrial group. The Asian company is now firmly entrenched in the North American market after stubbing its toe initially years ago when it was forced to close an assembly plant in Bromont, Que., near Montreal in 1994, a victim of recession that limited the factory’s production to well below designed capacity.

Kelleher stressed that Hyundai won’t make much money off the vehicles sold through the scrappage program, but admitted that it could result "in a big uptick in sales" — as many as 1,000 vehicles a month for the rest of the year, according to the company’s projections.

"We expect that if we’re the only one doing this, we’ll probably get a big uptick in sales, but we’re not going to benefit financially from those sales," he said. "That’s not the end goal of the program."

Kelleher said Hyundai Canada was inspired to launch the program after it saw the resounding success of a "cash for clunkers" program in the U.S.

The program offers consumers US$4,500 to trade in old cars for new fuel-efficient models. It’s been so popular that the $1 billion initially slated for the program was used up within two weeks and the U.S. government quickly earmarked another $2 billion to keep it running.

Similar programs in the U.K., France and Germany have also been credited with bringing consumers back to the showroom floor.

New vehicle sales in Germany increased by 20 per cent in April and a whopping 40 per cent in May, largely on the strength of the scrappage program.

In Canada, car makers and dealers have criticized the existing scrappage program as being too small to stimulate sales in any meaningful way, and have urged the government to develop a more robust incentive.

Under the current program, consumers can receive free transit passes, membership in a car-sharing program, money towards a new bike, $300 in cash or a $500 rebate on the purchase of a vehicle built in 2004 or later.

However, the incentives vary by province. New Brunswick and Prince Edward Island are the only provinces in which you can get the rebate. If you live in Ontario, Manitoba or Saskatchewan, your only option is the $300 in cash.

Critics of scrappage programs say they simply boost vehicle sales in the short term by prompting consumers who were already planning to buy a new vehicle to head to the showroom a few months early.

"I think the U.S. experience has shown us that it will definitely pull some sales forward, which is the whole point of the program, to get those older vehicles off the road as soon as possible," Kelleher said.

"Is it sustainable? I’m not sure. We’ll have to wait and see how it works out."

In the United States, the top 10 selling vehicles under the clunkers program do not contain any models by General Motors or Chrysler, the two companies that were saved from collapse by billions of dollars in aid from the U.S., Canadian and Ontario governments.

Hyundai has committed to its program for the rest of 2009 and Kelleher said it could be extended beyond that if it’s successful.