A flood of new vehicles being shipped to the United States and other foreign markets has reached such a crest that Nissan Canada Inc. is warning its dealers that their franchises can be terminated if the cars the company delivers to them are exported out of Canada.

“A sale outside of Canada results in a loss of loyalty, service and other benefits of a sale within Canada,” company president Christian Meunier said in a sternly worded letter to the auto maker’s dealers across the country. “It may also affect international allocation of products, thereby adversely affecting Nissan Canada and our dealer network.”

The warning comes amid a surge in exports of new vehicles caused mainly by the fall in the value of the Canadian dollar against the U.S. currency, which has made cross-border vehicle shopping a bargain for Americans.

The number of Canadian-certified vehicles bought by registered importers in the United States almost quadrupled in the first nine months of 2015 from levels hit in all of 2013. And the United States is on pace to more than double the numbers from the 2014 level of 73,437.

Through the middle of September, the number had soared to 138,848, said Tahverlee Dunlop, president of the North American Automobile Trade Association, which represents vehicle importers and exporters who buy and sell around the world, not just in Canada and the United States.

Other auto makers operating in Canada ban the export of vehicles originally allocated to their Canadian dealerships, but dealers in various parts of the country say they are being bombarded with calls by their U.S. counterparts and export brokers.

“I’m faced with it every day,” said one dealer who owns multiple franchises. “Every brand that we sell.”

Other manufacturers have issued verbal warnings that selling vehicles for export is prohibited, other dealership sources said.

“We count on your support and expect you to live up to the language and spirit of your obligations, not just because you are contractually bound to do so, but because it is in our interest to do so,” Mr. Meunier’s letter said. “You should be aware that Nissan Canada will vigorously enforce our policies and hold you to your [dealer sales and service agreement] obligations.”

Nissan Canada spokesman Didier Marsaud said no franchises have been terminated, but would not say whether the Japan-based auto maker has discovered vehicles allocated to Canada showing up in the United States or other countries.

Evidence from past instances of export surges shows that buyers typically focus on luxury vehicles because that is where they can save thousands of dollars. Such vehicles are often in short supply amid the global boom in luxury vehicle sales.

The price gap is evident on the QX60, a crossover sold by Nissan’s luxury Infiniti brand.

The vehicle carries a manufacturer’s suggested retail price of $43,395 (U.S.) at an Infiniti dealership in suburban Detroit. About a two-hour drive away in London, Ont., the price was $45,944 (Canadian). So an American would pay the equivalent of $35,143 (U.S.) and save more than $8,000.

“The more expensive the car, the more sense it would make to export it from another country,” said Hillary Chouinard, president of auto brokerage VSI Worldwide Trading of Dartmouth, N.S. The small additional cost would be replacing the speedometer and paying registration fees and any broker charges.

“It really comes down to – in our industry’s case – the supply,” Ms. Dunlop said. “Where is it smarter to supply the vehicles from? It doesn’t really matter where they’re going to go, but our members will look at where is the best place to purchase a vehicle before they export it.”

Ms. Chouinard ships a lot of vehicles to Europe, where she finds that Chevrolet Corvettes and Suburbans and Ram pickups are popular.

Toyota Sienna minivans are hot in China, she noted.

U.S. sources used to represent 90 per cent of the vehicles she was buying. This year, because of the currency value, she has purchased just one vehicle in the United States.

The edict from Nissan Canada and other auto makers that vehicles allocated to Canada cannot be sold outside the country frustrates her.

“I don’t think it’s right for manufacturers to be punishing their franchised dealers for who they sell their cars to. They sell them at a fair price. You buy almost anything else in the world, [manufacturers] don’t dictate what you do after you’ve bought and paid for it.”


The Globe and Mail
Published Tuesday, Oct. 06, 2015 4:17PM EDT
Last updated Wednesday, Oct. 07, 2015 6:38AM EDT