Canadian new-vehicle sales will top two million units in 2018, but will narrowly miss setting a record for the sixth consecutive year due partly to price increases, according to Scotiabank Economics.
Although record-setting January sales of 117,797 set the bar for an annualized 2.1 millions units sold in 2018, the financial institution expects sales to soften as the year goes on and Canada will miss setting a sixth consecutive sales record.
Automakers report their February sales on March 1.
“An expected moderation in economic growth, driven by slower job creation and weaker gains in household wealth, are likely to reduce full-year 2018 sales to two million units,” Scotiabank’s February Global Auto Report says.
Price increases will also affect sales, the report says.
“Accelerating price increases for new cars and light trucks have reduced new vehicle affordability to the lowest level of the past decade and will likely also weigh on purchases, especially as real income gains soften from last year’s robust performance,” the report says.
Ontario dealerships, which sold a record 847,000 cars and light trucks in 2017, will be hardest hit by the slowdown.
“Ontario is expected to account for most of the decline in purchases this year, undercut by a slowing housing market and a record low saving rate,” Scotiabank forecasts.
Sales in that province are expected to fall to 821,000 in 2018, a three per cent decrease over last year.
Scotiabank says Ontario sales will be “pressured by nearly an 80 per cent drop in household savings over the past year.”
The savings rate in Ontario has plunged to only 0.6 per cent, nearly 80 per cent lower than the national average of 2.6 per cent.
Meanwhile, Quebec faces a different set of challenges.
Quebec has one of the youngest vehicle fleets in the country. More than 52 per cent of all cars and trucks on the road in Quebec are less than eight years old, compared with less than 44 per cent in the rest of Canada.
The Belle Province has a heavy reliance on leasing. Leases account for nearly 40 per cent of household volumes in Quebec, compared with only 23 per cent in the rest of Canada.
And there won’t be many new buyers entering the market because of stagnant population growth, which remains below the national average. As a result, the number of potential vehicle buyers in Quebec is expected to be flat over the coming year, compared with a projected gain of 0.5 per cent for the rest of Canada.
Across the rest of the country, sales will edge down in B.C. and Atlantic Canada, moderate in Alberta and be flat in Manitoba and Saskatchewan.