The number of new vehicles sold this summer will likely have less to do with typical seasonal trends and more with whether customers will be able to buy the vehicles they want.
“Normal seasonal factors that we’re all used to [have] kind of been tossed out the window,” said Brian Murphy, managing director of Kelley Blue Book and Data Solutions at Cox Automotive Canada. The market “is going to be driven more by, ‘When is there going to be product?’ If a given factory that builds a high-volume product shuts down for three weeks, it will show up in the [sales] numbers.”
For automakers able to overcome parts shortages and build enough product to meet demand, this summer could be a stellar selling season.
General Motors, for example, announced May 31 that it plans to restart most of its plants affected by the industry’s microchip shortage within about a month. It’s CAMI plant in Ingersoll, Ont., has been running now since June 14. And Stellantis will fire up its minivan plant in Windsor, Ont., on July 5.
But plants in the United States, such as the General Motors factory in Kansas City, Kan., remain down or have planned downtime as far into the future as August.
Buyers who typically might have visited dealerships in the spring could wait until the summer in the hope that their vehicle of choice will be in stock. And with travel restrictions in flux, many consumers might not be vacationing, freeing cash for vehicle purchases.
“Demand is certainly there,” said Robert Karwel, senior manager of the automotive practice at J.D. Power Canada.
“So far, sales have been pretty good this year. Canadians are opening their wallets, and they continue to spend to acquire new vehicles. That’s probably the most important thing that we’re seeing. Consumer sentiment is positive, and consumers are acting on it.”
Scotiabank Economics expects annual sales to reach 1.8 million, down from about 1.9 million in pre-pandemic 2019.
The average price of a new vehicle in Canada is likely to rise in the coming months as automakers prioritize building their higher-margin and higher-trim-level vehicles over those with lower margins and base trims, Karwel said. The latest figure as of June 4 was $41,500.
Incentives, meanwhile, have fallen. According to J.D. Power, the average vehicle in Canada has incentives worth eight to nine per cent of a vehicle’s price, down from 11 to 12 per cent last year.
“The [incentive] trend, I’d say it’s best described as a wobble,” Karwel said. “We’re going to wobble a lot. It’ll go up, it’ll go down, it’ll go up and it’ll go down.”
STICKING TO STICKER PRICE
Outside of a handful of specialty vehicles, Karwel said, it is unlikely that many new-vehicle transactions in Canada this summer will be above the manufacturer’s suggested retail price, as has become the case in the United States.
Sibling publication Automotive News, citing J.D. Power data, reported that through May 26, 69 per cent of new-vehicle transactions in the United States that month were “near or above” the sticker price, up from 41 per cent in May 2020 and 36 per cent in May 2019.
“We still have higher incentive levels in Canada than in the U.S.,” Karwel said, “so it would still take much more demand for us to reach a point where more of your average mix of vehicles ... could be transacting for over list price.”