TORONTO -- The downward trend in Canadian new-vehicle sales is expected to continue for the next few years and may not return to the two-million mark until 2026, warns one global automotive analyst.
Jeff Schuster, president, Americas Operation and Global Forecasting for Detroit-based LMC Automotive, said a combination of uncertainty in the global market and a record level of consumer debt in Canada are contributing factors to the levelling off of sales.
Canadian new-vehicle sales have fallen in 19 of the last 20 months, according to the Automotive News Data Center in Detroit. After annual new-vehicle sales hit the two-million mark for the first time in 2017, they fell in 2018, ending an eight-year run of yearly sales increases. Sales are poised to fall again in 2019.
“We’re calling for about 1.92 million units [sold this year] and weakening a little bit further next year at about 1.9 million,” he said Wednesday at the eighth annual TalkAUTO conference in Vaughan, just outside of Toronto. “For the market out to 2020, we’re expecting a negative growth rate at the top line of about 2.3 per cent…So we’re not expecting a market to be down a lot, but we’re not expecting a potential for a lot of growth.
“All of that decline has been on the car side of the market. I don’t think that’s a surprise to anyone. The market continues to shift to trucks. SUV and pickups are outperforming the marketplace.”
He said the overall debt levels in Canada are at record levels and that pressure will remain with the market for some time. He said the charges associated with servicing the debt are also contributing to a possible pullback in the overall economy and impacting consumer decisions.
The main driver causing the continuing flat sales are affordability, he said, adding that consumer base transaction pricing is up substantially as automakers decrease incentive spending.
“It’s more difficult for consumers to afford the vehicles,” he said, adding that buyers are looking at longer loans and longer lease rates
“This is something the market has been dealing with for quite some time,” he said. “There was a pullback at least in long loans [last year], but we’re seeing that creep back in where more than half of the financed transactions are more than 84 months in term. When you look at the leasing that’s been even more pronounced. We’ve seen an increase in the overall leasing in the mainstream market reaching 80 per cent over that 48-month term. In the premium market, it’s right around 60 per cent.”
Consumers’ willingness to visit showrooms “has a lot to do with what happens with their current vehicle,” he said.
“We’ve seen a rise of in a number of consumers coming in with a negative equity. Up to nearly 30 per cent of all transactions with trade have negative equity and you can see that increase with the dollar amount of negative equity. It’s a little over $7,000 in negative equity.”
Overall, he said the global market is in decline with a high degree of uncertainty.
“I don’t want to dwell on the uncertainty, but I think it is causing a pause on what’s taking place in the major markets around the world, here in Canada and North America as well,” he said. “Investment is on hold, decisions are on hold until … we know the rules of the market.”
