Labour negotiations and changing political dynamics could throw the industry for a loop in a year that might otherwise look a lot like 2019.
Experts expect new-vehicle sales to continue to slip as the Canadian economy flattens out, while dealers can expect to see more of the consolidation that has transformed retailing over the past several years.
“We’re all crossing our fingers that  is not as soft as , but I think it’s going to be a little bit more of the same,” said Brian Murphy, Canadian Black Book’s vice-president of research and analytics.
But this fall could bring some drama to the year. Unifor will negotiate with the Detroit automakers after all three planned job cuts at some of their Canadian operations in 2019 and 2020. And the U.S. presidential election has the chance to yet again upend trade policy, just as the 2016 election did.
Here’s what to expect from the Canadian auto industry:
Economists expected the new-vehicle market to continue its decline in Canada. Scotiabank estimated a roughly 0.5-per cent drop in sales compared with 2019, to about 1.915 million units.
“I think our baseline is that we will continue to see a slow drop in overall sales,” said Rebekah Young, Scotiabank director of fiscal and provincial economics.
A year-over-year decline in 2020 would be the third straight drop after new-vehicle sales set a record of 2.04 million in 2017. Flattening economic growth means that little upside exists for the market, especially as rising new-vehicle prices push some consumers into used vehicles.
“There are some Canadian indicators coming in suggesting some weakness in the economy,” Young said, noting concerns around November jobs numbers and economic growth under two per cent in 2019.
Consumers are expected to continue favouring utility vehicles and pickups over passenger cars, continuing a trend over the past decade. Light trucks accounted for 74 per cent of total Canadian new-vehicle sales in 2019, according to DesRosiers Automotive Consultants. That could soon rise to 80 per cent, Black Book’s Murphy said, though not much higher than that.
Single-point dealerships in Canada are becoming rarer as margins on new vehicles shrink and large groups continue consolidating. Don’t expect that to change, said Gordie Gerbrandt, director of Canadian operations for Tim Lamb Group, a U.S.-based dealership brokerage.
“Some dealers are kind of contemplating where the market is at and where it’s going right now,” Gerbrandt said.
More than half of all new vehicles in Canada are sold at dealerships owned by groups, a figure that has surged from as low as just nine per cent in 2000, according to DesRosiers.
Gerbrandt said tight margins, high costs associated with automaker-mandated dealership image programs and the increasingly complex nature of the industry are combining to make it difficult for many independent stores and small dealership groups to navigate a declining new-vehicle market.
A year after contentious negotiations in the United States with the United Auto Workers that led to a 40-day strike at General Motors plants, the Detroit Three will go to the bargaining table with Unifor in 2020. It likely won’t be much easier for the automakers in Canada — especially considering that Unifor and its predecessor, the Canadian Auto Workers, have historically been the more aggressive of the two unions.
Unifor President Jerry Dias said the union seeks major investments from each of the automakers, even as the companies cut back in Canada. In 2019, GM ended more than a century of vehicle assembly in Oshawa, Ont., and Ford Motor Co. has said it would cut about 450 jobs at its Oakville, Ont., plant by February. Fiat Chrysler Automobiles plans to end one of three shifts at its Windsor, Ont., factory.
“It’s clear that there’s enough money to go around, and we’re going to be expecting our fair share as well in 2020 bargaining,” Dias said.
Negotiations with GM, which also runs a powertrain plant in St. Catharines, Ont., could be acrimonious. In late 2018 and early 2019, Unifor organized a major anti-GM campaign in response to the automaker’s plans to end vehicle production in Oshawa. And in 2017, the union went on strike at GM’s Ingersoll, Ont., plant for about a month to back contract demands.
“That has certainly clouded our relationship with General Motors,” Dias said. “That’s just a fact.”
Contract talks covering employees at the Ingersoll plant take place in 2021.
The political calculus in Canada changed in 2019 with the election of the new Liberal minority government. Prime Minister Justin Trudeau’s Liberals now need support from one of the opposition parties to pass legislation — making, for instance, the ratification of the United States-Mexico-Canada Agreement less of a slamdunk than it once seemed.
While the Conservatives have indicated they’ll support the USMCA, the New Democratic Party is calling for regular reviews of the deal.
The new composition of the House of Commons also makes it more likely that the Liberals will pursue policies on electric vehicles and luxury taxes designed to win support from the NDP. The Liberals, for instance, have already said they would pursue a 10-per-cent luxury tax on vehicles over $100,000.
Politics south of the border could also be a factor later in the year. Donald Trump’s 2016 election ushered in an era of uncertainty in North American trade that finally seemed to resolve itself with the negotiation of the USMCA. But the November 2020 presidential election could threaten to change that, should Trump or his Democratic opponent pursue further changes to trade policy or if the U.S.-China trade war heats up.