Canadians continue to flee from sedans and flock to light trucks with no sign of stopping, prompting manufacturers to give consumers more of what they want in the coming months.
Automakers sold 1.92 million vehicles in Canada in 2019, and 74 per cent of those were light trucks, up three percentage points over 2018, according to the Automotive News Data Center in Detroit. Total sales for the year were down 3.6 per cent.
“We predicted the market to be down three or four per cent, and that’s exactly what happened,” said Dennis DesRosiers, head of DesRosiers Automotive Consultants in Toronto. What DesRosiers doesn’t know, however, is when the migration from cars to trucks will end.
“I don’t think we’ve reached a plateau,” he said.
DesRosiers estimates that automakers plan to introduce 60-plus new vehicles in the coming model year, of which 80 per cent are expected to be light trucks.
“If 75 to 80 per cent of the new product is light truck, you have a good chance of 75 to 80 per cent of sales being light truck,” he said. “We don’t know where the top is. I would have thought 70 per cent would be about it. Now we’re at 75, and we’re going up.”
DesRosiers’ sales figures have the light-truck segment’s share pegged at “just a whisker under 75 per cent.”
Data vary slightly by analyst, but car sales were down about 22 per cent to 24 per cent for the year. The light-truck segment, which comes with much higher profit, climbed about two per cent.
“If that keeps up, we’ll be at 80 per cent [lighttruck sales] in no time,” DesRosiers said.
Trucks are the industry’s moneymakers, he added.
“The light-truck side is where you have higher profits. Not necessarily higher profit margins but higher profits because of the type of product it is.
“There are a lot of companies making a lot of money in this segment, and a lot of dealers are doing very well as well.”
In 2019, the average new-vehicle transaction price was $35,400, according to J.D. Power. That’s up more than five per cent compared with 2018.
“This is a healthy gain,” said Robert Karwel, senior manager of J.D. Power’s automotive practice in Canada.
The average profit margin for a vehicle in 2019 was 4.1 per cent, Karwel said.
“Dealer profitability has been trending upward in Canada for the last four years, which is nice to see. The gains aren’t huge, but unlike the U.S., it’s moving in the right direction.
“The reason profitability is slowly moving up is due to the average increase in transaction pricing for cars in Canada. People are buying more and more expensive cars,” Karwel said.
“We know this because if you split the market into price bands, only the more expensive price bands are growing.”
LOTS OF LUXURY
Luxury brands such as Audi, Cadillac, Land Rover, Lexus and Lincoln all posted year-over-year gains. So did ultraluxury brands such as Rolls-Royce, Lamborghini and Bentley.
While overall sales missed the two-million plateau, according to the data centre, they managed to stay above 1.9 million units sold for the fourth straight year.
“I tell dealers it’s not bad at all. It’s pretty darn good,” Karwel said.
Retail sales for the year were down about 3.5 per cent, Karwel said, “but let’s not panic.”
DesRosiers echoed Karwel word for word in describing the industry as being in a “flatline situation.”
“There’s no sign the market will be in a free fall going forward, but there’s no sign of an uptick, either,” he said. “We have essentially reached a plateau, and we’re going to stay there for a few years, somewhere between 1.9 and two million units. It’s where we’ve been for the last five years, and it’s where we expect to be for another two or three years. “There was a day, not that long ago, that if we hit 1.5 million units, we were in nirvana. Everyone was jumping up and down. Now, if we don’t hit two million, people are depressed. But you can make a lot of money in a 1.9-million market.”
Among automakers, Ford finished 2019 as the country’s top-selling company and had Canada’s top-selling brand and vehicle.
Ford brand sales totaled 279,195 units, down 3.6 per cent over 2018. The F series, with 145,064 units moving over the curb, was the bestselling pickup for the 54th consecutive year and the bestselling vehicle for the 10th straight year.
Meanwhile, Toyota Canada managed its best sales year on record despite a December during which sales plunged 16 per cent.
“We were fortunate [last] year,” Cyril Dimitris, Toyota Canada vice-president of sales and marketing, told Automotive News Canada. “It was all about the product we launched.”
Toyota sold 237,091 vehicles in 2019, up 2.4 per cent over 2018, establishing a new high-water mark for the company.
The RAV4 crossover has become the top-selling vehicle outside of the full-size-truck segment.
The Toyota and Lexus brands each set records with 211,551 and 25,540 vehicles sold, respectively. Toyota brand sales were up 1.9 per cent for the year and Lexus 5.9 per cent.