2022 sales forecast: Challenges remain, and the first quarter will be ‘very tough’

Automakers and their Canadian dealers in 2021 grappled with COVID-19 restrictions, an inventory shortage and weather disasters on the West Coast but still sold 1.66 million new vehicles, a seven-percent increase over the year before.

So what’s next?

“In some ways, 2022 is looking a lot like 2021,” Rebekah Young of Scotiabank Economics told Automotive News Canada. “We have many of the same challenges on the table.

“We were already into the inventory shortages and material shortages at the beginning of 2021,” said Young, the bank’s director of fiscal and provincial economics. “The pandemic, sadly, is still on the table with yet another wave.”

Shahin Alizadeh, CEO of Downtown Auto Group in Toronto, is bracing for a bumpy start to 2022.

“I think it will be a similar type of an environment to 2021. We’re starting the year with challenges, with more COVID closures, more health issues hovering over the economy.”

On Jan. 5, Ontario enacted sweeping restrictions yet again to slow the spread of the highly contagious Omicron variant of COVID-19. Several segments of the economy — such as theatres, bars and gyms — were closed.

Auto dealers are allowed to operate at 50-per-cent capacity. But the bigger concern remains inventory. “I would say the first quarter, based on inventory, is going to be very tough,” Alizadeh said. “I know that in our case — and I talk to a lot of colleagues, too — the next 60 days in January and February will be extremely tough to accommodate the needs of the marketplace.

“It’s tough enough to fill the back orders, let alone those who choose to get into the market now.”

In its monthly forecast at the end of the year, U.S.-based AutoForecast Solutions LLC said “the inventory issue remains on the scene” and called the shortage “a global problem that seems to be turning the corner, but it is far from solved.”

In her Jan. 5 Auto News Flash, Scotiabank’s Young said North American auto production had been improving through November, but from “seriously low levels and at a pace not yet leading to material changes in vehicle inventory levels.”

“The sudden surge in Omicron cases threatens to stall the nascent recovery in auto production in the early months of 2022 — which would, in turn, impact auto sales.”

ENOUGH DEMAND FOR PRE-PANDEMIC SALES LEVELS

Young forecasts 1.75 million units in 2022 — an increase of 5.4 per cent over 2021 — but said that could easily surpass 1.9 million without delivery and production disruptions. Sales in pre-pandemic 2019 topped 1.94 million. Young cautioned that 2022 will be a roller-coaster ride and therefore difficult to predict.

DesRosiers Automotive Consultants estimated that December sales fell 4.5 per cent from a year earlier to 102,919. Monthly figures are estimates because most automakers report quarterly and not monthly.

Shortages on opposite ends of the buying process hindered sales the past two years. In 2020, Canadians couldn’t leave their homes much to visit dealerships, as provincial and territorial governments enacted strict public health measures to flatten the COVID-19 curve early. And in 2021, while people returned to work — and shopping — new vehicles were few and far between because of bottlenecks in the supply chain and shortages of semiconductors.

“While 2020 was a year beset by demand problems, 2021 was hit by problems on the supply side of the equation,” said Andrew King, DesRosiers managing partner.

FORD RALLIES TO STAY NO. 1, BEATING OUT TOYOTA

Ford Motor Co. was the top-selling automaker of 2021, increasing sales 1.7 per cent to 243,447 units and topping Toyota’s 225,215, according to the Automotive News Research & Data Center in Detroit.

Ford had to rally to pass the Japanese automaker, which was the No. 1 seller in the United States in 2021, ending General Motors’ 90-year run as king south of the border. Ford trailed Toyota by 1,228 units in Canada through the first three quarters but has been the top-selling automaker in Canada for 13 consecutive years.

“With all of the challenges that faced Canadians in general and our industry specifically, one thing remained true through 2021 — consumers continue to trust Ford to deliver the vehicles and services they are looking for more than any other automotive brand,” Ford Canada CEO Bev Goodman said in a statement.

Toyota Canada declined to comment. GM placed third with 217,475 vehicles sold in 2021. “Despite continued inventory constraints the industry faced in 2021, GM delivered strong year-end sales results thanks to high customer demand across our portfolio,” Sandor Piszar, GM Canada vice-president of sales, service and marketing, said in a statement.

SOME BRANDS POSTED GREAT GAINS

Success stories were hidden among the crises that battered the industry. Kia Canada generated 79,198 sales, making 2021 the best year on record for the brand. Kia and its South Korean cousin, Hyundai, both weathered the microchip shortage early on in 2021.

“As we look forward to 2022, consumer demand remains exceptionally high, leaving us optimistic for the year ahead with new ... models like the... Kia EV6, set to arrive in dealerships [early in 2022],” Kia Canada COO Elias El-Achhab said in a statement.

Meanwhile, Subaru Canada posted a 9.1-per-cent gain over 2020, with 56,870 units sold in what the brand called a “tumultuous year.”

There’s a lesson to be learned from the inventory shortage, said Alizadeh of Downtown Auto Group.

“As an industry, both as retailers as well as [automakers], we learned that we don’t have to pile up hundreds and hundreds of vehicles in our yards and in our lots for us to accommodate the consumer needs,” he said.

The ideal business model falls somewhere between the just-in-time delivery created by empty lots and the overflowing lots of the past, said Alizadeh. He’d like to get back to something closer to the previous system, but with some tweaks.

“At some point,” Alizadeh said, “there has to be a much better balance between the supply chain and its ability to produce the bare minimum. If there’s one thing I would like to get back to, it’s the ability to decide internally what those inventory levels and the numbers should be, as opposed to being at the mercy of COVID and chip shortages and plant shutdowns.”