2021: The Year in Review

The year began and ended with the Canadian auto industry still in the grips of the COVID-19 pandemic. From plant shutdowns and microchip shortages, to soaring used-car prices and consumers hoarding cash, the virus continued to dominate headlines. As the year went on, however, slivers of optimism began to poke out from under the doom and gloom.

JANUARY

Canadian auto parts makers say COVID-19 border restrictions are costing millions of dollars in lost business as key staff continues to face challenges meeting with customers and suppliers in the United States ... Economists say Canadians are sitting on cash — money they have been unable or unwilling to spend during the pandemic — and are expecting a flood of newcar sales in the spring … Auto shows across the country cancel, in some cases for a second straight year, forcing automakers, dealers and other businesses that would otherwise attend the Toronto, Montreal and Vancouver auto shows to find new ways to connect with consumers.

FEBRUARY

Of the many impacts of COVID19, a shortage of integrated circuits — the brains behind many new-car features — is forcing automakers to idle plants and stockpile nearly finished vehicles that cannot be sold. There appears to be no solution as new-vehicle inventory is stressed ... Despite that, dealers say that while sales are down, profits are higher ... Unifor, the union representing workers at the Detroit Three automakers in Canada, celebrates as General Motors announces a $1-billion investment in its CAMI assembly plant in Ingersoll, Ont., to build electric vans under its new BrightDrop brand. The plant builds the Chevrolet Equinox utility vehicle, but up to now there have been no future products assigned to the plant, casting doubt on its future.

MARCH

The shortage of new vehicles means that desperate customers instead resort to buying used vehicles. In some cases, prices at auction for used vehicles are at or above the typical retail price, squeezing dealer profits. Dealers begin aggressively pursuing customers, encouraging them to sell their vehicles to put stock on the lot ... The spring selling season is expected to be in jeopardy as those microchip shortages hammer dealership inventories ... Meanwhile, experts say the pandemic is expected to unleash irreversible changes on the industry as customers demand new ways of doing business, from contactless service to online sales processes.

SECOND QUARTER:

APRIL

Retailers describe the state of industry-wide inventory as “Mad Max right now,” invoking the name of the 1979 post-apocalyptic thriller and suggesting it’s a battle for survival as inventory troubles continue to thin lots ... The Saskatchewan government wants to increase the registration fees of electric vehicles to offset lost fuel-tax revenue. Frustrated industry officials say such a tactic is counterproductive to EV adoption ... Automakers and suppliers lament what wasn’t and will never be, as the microchip shortage prevents 91,000 vehicles from being built in Canada.

MAY

Is $40,000 extra per vehicle too much for even the luxury market to absorb? That’s the issue in British Columbia where a new federal luxury tax — proposed for Jan. 1, 2022 — coupled with existing provincial taxes would add 27 per cent to the cost of a $150,000 vehicle, and dealers are livid. Aston Martin Lagonda chief engineer Fraser Dunn is announced as the chief engineer for Project Arrow, a $30-million initiative spearheaded by the Automotive Parts Manufacturer’s Association to create a made-in-Canada electric vehicle ... Inventory shortages — the result of an unresolved dearth of microchips — continues to dominate headlines, with some industry officials predicting continuation into 2022.

JUNE

It’s a triple whammy for dealership construction as COVID19, a move to online retailing and a shift to EVs — albeit a slow one — slams the brakes on an auto-mall project near Toronto. Newroads Automotive Group was to begin the biggest development in its 58 years, but the project is on indefinite hold. It’s a reality not limited to Newroads, a Toronto dealership architect says; the cost of building a store has risen 15 to 20 per cent because of pandemic-related supply shortages ... As Canadians begin to sense easing pandemic restrictions and are about to go on a spending spree, economists warn dealers they won’t be the only ones in a no-holds-barred battle to tap into skyrocketing personal savings. Dealers will compete with travel, activities and other big-ticket items ... Demand for used vehicles south of the border is bleeding away supply at Canadian dealerships. J.D. Power estimates as much as 25 per cent of vehicles that were sold new in Canada could end up in American driveways.

THIRD QUARTER:

JULY

The federal government accelerates its goal of having a zero-emissions mandate — where all new cars sold in Canada will be electric — to 2035 from 2040. Industry watchers question the ability of the country’s electrical grid and automakers to shift that far in only 14 years ... Automotive News Canada unveils its annual list of 16 Canadians to watch, from an event consultant for Toyota to Rolls Royce’s first general manager for Canada ... Word leaks that U.S. automotive retail giant Lithia Motors is eyeing an expansion into Canada, although it is not yet known how that might unfold.

AUGUST

As the industry considers a move to a European style of automotive retailing — dealers act as agents and are paid a commission and the automaker owns any inventory — retailers are concerned about what such a shift could mean for the valuation of their businesses and whether there would be compensation for orphaned assets — dealerships and real estate — that might no longer be relevant ... The news is either very good or very bad for Stellantis’s assembly plant in Brampton, Ont., where the plant’s product mandate is expected to end after 2023, according to analysts. Options range from closure to making electric vehicles or EV batteries ... Infiniti is offering to let dealers consolidate the Infiniti and Nissan brands under one roof to save costs, but dealers say a stalled rollout of new vehicles is the bigger problem facing the brand ... It becomes known that U.S. retailer Lithia Motors is in talks to acquire Canada’s Pfaff Automotive.

SEPTEMBER

The automotive industry — from parts makers to automakers to dealers — is wrestling with the issue of mandatory vaccinations for staff working in company facilities. It’s a tightrope between protecting employees’ health and infringing on their rights, compounded by the fact many jobs simply can’t be done remotely ... Pfaff Automotive says the acquisition by U.S.-based Lithia Motors — called Lithia and Driveway (the company’s proprietary online-sales interface) — paves the way for rapid growth. An influx of cash as well as new ways of managing dealerships puts the company on the path to buying other dealerships and expanding its footprint. An industry observer says the deal will likely lead to other expansions by U.S. dealership groups into Canada ... Low vehicle inventories mean that there are few or no incentives from automakers. The average transaction prices are at record levels, pricing many buyers out of the market.

FOURTH QUARTER: 

OCTOBER

The inventory woes wrought by plant shutdowns related to the microchip shortage take a 12-per-cent bite out of third-quarter sales, and there is still no end in sight. Inventory erosion is likely to continue ... Provincial utility companies say the grid is prepared for the onslaught of new electric vehicles related to the federal government’s goal of 100 per cent zero-emission sales by 2035 ... Industry experts advise dealerships to maintain pandemic-inspired practices such as contactless drop-off, pickup and payment to improve customer satisfaction and loyalty even as the pandemic recedes.

NOVEMBER

Canada is preparing for a trade battle over incentives for electric vehicles proposed by U.S. President Joe Biden. The issue: the incentives of up to US $12,500 per vehicle apply to U.S.-made EVs. The Canadian government and much of the auto industry believes the policy is protectionist and poses an existential threat to Canada’s auto industry ... The Detroit Three automakers in Canada impose December deadlines for workers to be fully vaccinated against COVID-19. Industry experts expect short-term labour disruptions, anticipating those workers who are not yet vaccinated likely will never be. Unifor, the union that represents the workers, supports workers’ freedom to choose, but, ironically, has a vaccine mandate for its offices ... The Canadian International AutoShow in Toronto — Canada’s largest — is returning after cancelling for 2021. Officials expect fewer automakers to the Feb. 18-27 show, but General Manager Jason Campbell is promising “new, exciting features.”

DECEMBER

The restart of General Motors’ Oshawa Assembly Plant — after a $1.3-billion overhaul — churned out its first Chevrolet Silverado pickup in early November, well ahead of schedule … The November flooding in British Columbia leads to highway closures that delay the flow of vehicles and parts into, out of and within the province. Vehicles in the Port of Vancouver are also delayed. Highway closures are expected to persist well into the new year ... Suppliers sound the alarm bells on rising costs that threaten to put them out of business. That is unless automakers are willing to reopen contracts. While some are willing to do so, others are refusing, according to industry executives ... Mercedes-Benz sells its remaining seven corporate-owned dealerships to the AWIN and Zanchin auto groups. The automaker says it wants to focus on running the dealer network rather than selling cars ... Automotive News Canada announces its 2021 AllStars, recognizing those who went above and beyond in the industry. Among the notables are GM Canada President Scott Bell, Steele Auto Group President Kim Day and retired industry analyst Dennis DesRosiers, who was cited for lifetime achievement.