Getting Bigger

In Ontario, there’s never been a better time to launch or expand an ambitious automotive emissions testing program. The Walkerton tainted water disaster and a right-of-centre provincial government looking towards an election has created a political environment ripe for the one issue with no apparent downside: environmental protection. For the automotive service industry, however, the question about whom ultimately pays for reduced auto emissions can be quite literally the sixty-four thousand dollar question.

A different consumer

Drive Clean’s Phase 2 program encompasses what is essentially the commuter region around the Phase 1 city of Toronto, and includes some of the most heavily populated portions of Southern Ontario. Consumer acceptance of the program in the urban Phase 1 area has been excellent, and combined with few problems with fraudulent or incompetent testing, Phase 2 would seem to present few problems. On the consumer side, however, the assumption that Drive Clean will see the same high approval ratings is about to be tested, with the first notices scheduled to mail for October 1st ahead of the Phase 2 start up on January 1, 2001.

While the success of the implementation of Drive Clean is a given since it will happen, popular or not, the possibility of changes to the system are not only possible, they are almost certain. Although technical issues are still under review, (such as equipment certification) an important but little discussed issue may be a major factor as the provincial election nears: consumer satisfaction. While the current Conservative government was elected largely on the strength of its popularity in the “905” area code (representing affluent suburbs surrounding Toronto), Drive Clean Phase 2 encompasses areas with considerably lower median incomes whose residents drive older, higher mileage vehicles on generally long commutes. And with no waivers on testing for the purpose of selling or buying a used car, the effect on used car pricing will likely be a slight decrease in the supply of higher mileage, older models, and used car price increases reflecting repair costs after trade-in. Another unknown factor is whether outlying communities will perceive the program as a tax grab, or an attempt to force rural citizens to pay for an urban pollution problem. At the point of contact for the consumer, credibility remains an issue. Look for the Ministry to address the annoying two-tests-in-one-year issue when selling a vehicle, as well as the possibility of an idle test. The deletion of the under hood component visual inspection, as is planned for B.C.’s AirCare, has not been addressed. The Ontario Cabinet is scheduled to lock in Phase 2 program modifications at the end of August.

Is the program fair?

“Fairness” at least in terms of the Drive Clean program, is a relative concept: fair to whom? Advocacy groups for motorists, the repair industry and the environmental movement are all lobbying the Ontario government intensively, although radical program changes now seem unlikely. One contentious issue is the age of first test provision that currently requires testing after three years for new cars, and biennially from years four to twenty.

For the CAA, the three-year figure is a major complaint about Drive Clean, and the focus of a major effort to convince the MOE to extend the exemption. David Leonhardt, director of public and government relations for CAA Ontario explains: “We had a look at the data, and it shows that there are no significant failures until the seventh year. Even in a six-year old vehicle, when they are tested only four percent of them fail. It jumps to 11 in the seventh year. Focus attention, resources, time, whatever it may be, on the categories where you will find the gross polluting vehicles. So we’ve asked them to exempt for six years from testing.”

At the time of writing, the position of the Drive Clean program office is enthusiasm for the three-year rule without an absolute commitment. Says Drive Clean spokesman Charles Ross: “Our position on that has been that we believe in the three model year rule that’s in now, because that ensures that vehicles will be tested before warranties are up on emission systems. If there’s anything wrong, they (consumers) can get a free repair. There will be arguments that the failure rate of new cars is very low. But the reality is that while that’s true, when they do fail, very often it’s a major component failure. So, while the rate is low, it could be serious and we feel the three-model year protects vehicle owners. At this point, everything is still under consideration. A number of things are under review at this time. A lot of things could change as we go into the fall.”

The CAA’s Leonhardt believes that there is more at stake than an arbitrary number of model years: “Imagine if it starts to become publicly known that the vehicles are just passing en masse for six years; the credibility of the program is going to go out the window, because it’s going to be seen as a consumer fairness issue.”

Difficult choices for repair facilities

While the consequences of the debate for the consumer may amount to little more than thirty dollars, in the Phase 2 territory, service operations are attempting to build business plans around existing rules, while waiting for the definitive word sometime this fall. The economics of Drive Clean put businesses in the Phase 2 area in a difficult position. Test-only margins are essentially zero, and within a given local area, the first service centre in the program will have a definite sales advantage in both emissions and new customer repair revenue. On the other hand, if the rules change, how will it affect the profitability of an installation already in the ground? An example is the proposed additional idle test. As of yet, no plans to increase the price, or decrease the government’s take have been announced. AARO advocacy committee member Don McLaughlin expressed his frustration over this issue during a recent meeting: “How am I supposed to run my business with this additional requirement and red tape?”

With capital equipment costs which can approach six figures and rumours of late entry Phase 1 shops losing money on testing, the conflicting pressures to “get in on the ground floor” against the need for enough program and market information to formulate a sound business plan are a serious concern. On the equipment side, at the time of writing, ESP Canada and Worldwide Environmental Products are approved suppliers, with several manufacturers on the verge of approval. A possible complication may be Phase 1 shops selling used equipment into the Phase 2 region as the Toronto market stabilises.

Meanwhile, the repair industry is scrambling to install the user base needed to satisfy consumer demand, while the program requirements remain under review. Drive Clean spokesman Charles Ross declares that when the time comes, the system will be ready:

“We’re in the process of lining up the training programs. We have about 500 facilities that are interested in being accredited throughout the area. Our biggest concern is that we have some ready to go. By mid to late August, and (certainly) by October, we will have a pretty fair network for the first people who will be getting their notices.”SSGM