New-vehicle sales took a thrashing in 2021 and are unlikely to recover to pre-pandemic levels for another full year, analysts say, but that road is also paved with uncertainty.
Scotiabank Economics forecasts that automakers will sell 1.67 million vehicles this year, down from the 1.8 million predicted early in 2021, in large part because of ongoing global-supply-chain problems that have cut into production.
A 1.67-million total would be a 7.7-per-cent increase over 2020 but 14 per cent lower than the 1.94 million sold in 2019, the last full year before the arrival of COVID-19.
Scotiabank forecasts 1.77 million sales in 2022 and 1.93 million in 2023.
Fundamental economic drivers, such as robust wage gains and job creation as well as elevated household savings, suggest auto demand should approach pre-pandemic levels, said Rebekah Young, Scotiabank’s director of fiscal and provincial economics. But “auto production capacity likely limits the pace at which supply can meet this pent-up demand. Consequently, our projections close that gap only by 2023.”
“There is still high uncertainty on this outlook, including around the pace of auto production recovery.”
Broken supply chains worldwide have curtailed global auto production, leading to severe inventory shortages on dealer lots. As well, the emergence of the Omicron variant, believed to be the most contagious mutation of the COVID-19 virus, “poses another material risk through further global supply chain disruptions,” Young said. “Domestically, recent weather events in British Columbia could temporarily impact the Canadian auto sector through port and rail turmoil.”
Heavy rains in mid-November led to flooding that washed out highways connecting the Lower Mainland — Vancouver and the surrounding cities — with the rest of Canada.
“As Canada competes for limited inventory, days supply continues to edge lower across Canada, clearly constraining sales in an otherwise robust demand environment,” Young said.
November new-vehicle sales fell an estimated 13.9 per cent to 110,448 units in November, compared with the same month a year ago, according to DesRosiers Automotive Consultants (DAC). Monthly sales figures are estimates because 35 of the 45 brands report quarterly instead of monthly.
“While the percentage drop was somewhat better than in September (minus 19.6) and October (minus 17.7) the more important [seasonally adjusted annual rate] was weak — falling to 1.45 million, the lowest level we have seen since the initial lockdowns of spring 2020,” DAC Managing Partner Andrew King said in a statement.
B.C. FLOODING TAKES A BITE
November performance “was again all over the map,” DAC said, as the microchip shortage hit certain products while sparing others. Some automakers posted double-digit gains, while others endured significant double-digit losses, “a pattern that is likely to persist until stability returns to the semiconductor supply chain.”
Of the 10 auto brands that still publicly report monthly sales, Mazda took the biggest hit. Sales were down 46.6 per cent to 2,975 vehicles. The company attributed the loss to ongoing supply-chain problems and the flooding in southern British Columbia that delayed vehicles at the Port of Vancouver.
It was a similar the story with Kia, which took the second-biggest hit: a 34-per-cent drop to 4,095 units.
Hyundai and its luxury Genesis line were the only two to post year-over-year gains. Hyundai sales were up two per cent to 9,840 units, while Genesis surged 199 per cent to 427.
Hyundai Canada CEO Don Romano attributed the November sales increase to Hyundai’s and Genesis’ “outstanding” lineups and “exceptional customer service” delivered by the brand’s retailers. “Third, our new business model of providing a hassle-free, digital customer journey is proving to be successful,” Romano said.
The brands, he said, “saw these elements come together in November.”
Looking ahead to 2022, “we’re expecting continued strong results, as a number of our facilities will be all-new or renovated,” Romano said.