Canadian new-vehicle sales had a jack-rabbit start to 2023. The question is whether they can sustain the torrid pace from which they left the starting line.
Automakers sold an estimated 98,259 vehicles in January, according to DesRosiers Automotive Consultants (DAC). That’s up 7.5 per cent from the 91,411 units sold in the same month last year. It’s also the second consecutive January in which automakers sold more than 90,000 new vehicles and increased year-over-year sales.
“January 2022 was hot and January 2023 was even hotter,” DAC said in a statement.
January 2022 had the strongest seasonally adjusted annual rate (SAAR) of sales of that year at 1.67 million. January 2023 was even better, at 1.79 million.
Sam Fiorani, vice-president of global vehicle forecasting at U.S.-based AutoForecast Solutions LLC, called the results “a surprising start to the year.”
“We didn’t expect it to hit as well as it did. It should help boost the year,” he told Automotive News Canada.
Fiorani doesn’t expect sales to continue at the 1.79-million pace. “We expect sales to be in the 1.65-million-to-1.7-million range.”
Annual sales of 1.65 million are, he said, “not normal.”
“It’s a little low. But we don’t expect the numbers to get back to two million by 2030, even. The industry is re-creating itself. We expect slow growth from now through the end of the decade.”
That doesn’t mean more vehicles won’t be on sale this year, though.
“We are starting to see inventory levels tick up a little bit,” Fiorani said.
DesRosiers made a similar observation.
“We are seeing signs of improved vehicle availability at a growing list of manufacturers,” said DAC Managing Partner Andrew King. “And while there are still some noticeable gaps, the breadth of the recovery in inventory has definitely spread.”
Canadian dealers have 30 days of inventory, Fiorani said, still well below the pre-pandemic norm.
“Traditionally, we had always been in the 65-plus range,” he said. “We’re waiting for inventory to get to reasonable amounts, which would put us in the 45-to-60-day supply range. Forty-five days would be a good medium of what the dealers want and the manufacturers want.”
They could get there — and then into an overbuild situation — more quickly. But that would take an economic hiccup.
“Being in an overbuild situation requires us to actually hit a recession,” Fiorani said.
HIGH INTEREST, HIGH DEMAND
But that’s not happening anytime soon.
“Right now, people are still buying things, even with the higher interest rates,” Fiorani said. “Unemployment rates are still low. We’re not in the position where people aren’t consuming these vehicles, yet. If that were to change, we could be in an overbuild situation.”
While the Bank of Canada raised interest rates to 4.5 per cent in January, unemployment stood at five per cent to end 2022. South of the border, unemployment fell to 3.4 per cent in January, the lowest since May 1969.
A recession would also “definitely inspire incentives,” Fiorani said.
“The problem is right now, we’ve spent a year or a year and a half with historically low inventories, which is fantastic for manufacturers because they can focus on high-end vehicles and sell every one they build, and dealers don’t have to maintain inventory,” he said.
Canadians continued to flock to light trucks in January. Eighty-six per cent of sales last month were light trucks, said David Adams, head of the Global Automakers of Canada, which represents the Canadian interests of every automaker other than the Detroit Three.
Meanwhile, DesRosiers Automotive Consultants remains optimistic about the short term at least.
“Unlike 2022, when things deteriorated in the spring, we are hopeful that the market will keep moving forward this year, building upon this early strength,” the consultancy said.
HOW THEY FARED
Only 10 brands continue to report monthly sales figures; six managed gains.
Luxury brands Acura, Genesis, Lexus and Volvo all posted increases, lending credence to Fiorani’s observation that the market for high-end vehicles remains strong. All but Acura grew by double-digit percentages — and even then, its sales were up 9.6 per cent.
Honda sales were off 22.8 per cent, Subaru 7.6 per cent and Hyundai 0.9 per cent. The Toyota brand increased 3.2 per cent, while Kia surged 33 per cent.