/‘I see a plateau right now’: Canadian auto sales down in 2019, but SUVs more popular than ever

‘I see a plateau right now’: Canadian auto sales down in 2019, but SUVs more popular than ever

Canadian new vehicle sales dropped for the second year in a row in 2019, with analysts expecting sales to dip again this year given economic uncertainty and longer vehicle lifespans.

But it isn’t a doom and gloom scenario for the auto sector, as Canadians are spending increasingly more money per vehicle as they shift from cars to light trucks — pricier SUVs, crossovers, pickups and minivans accounted for three quarters of all vehicles sold last year, according to separate analyses from DesRosiers Automotive Consultants and J.D. Power.

Canadians purchased approximately 1.91 million vehicles last year, down 3.6 per cent from 1.98 million vehicles in 2018, according to DesRosiers. The last time sales dropped two years in a row was during the height of the recession in 2008 and 2009, president Dennis DesRosiers said Monday.

While 2019 fell short of the peak of 2 million vehicles sold, it was still the fourth best sales year on record, DesRosiers said. Low interest rates and a reasonably strong economy balanced out the political uncertainty and trade wars that made Canadians hesitate before buying new vehicles.

“I see a plateau right now,” he said. “There’s very little threat of a downside but also very little possibility of a significant increase.”

Sales stagnated for about seven to eight years during the last recovery, and DesRosiers predicts history could repeat itself with stagnant sales until 2023. That’s not necessarily a bad thing, as it gives manufacturers the ability to anticipate demand and plan production accordingly.

“The worst thing is big swings,” he said. “Stability is good, calm is good.”

Another major factor in plateauing sales is that vehicles last a lot longer than they did at the turn of the century. In 2000, a vehicle’s expected lifespan ranged from 15 to 18 years while a vehicle purchased today could last up to 30 years, DesRosiers said.

“A record number of vehicles on road are very long in the tooth,” he said.

Longer replacement periods may be good for consumers’ wallets, but many older models guzzle gas since they were built before updated fuel efficiency standards.

When it comes to fuel efficiency, Canadians often express interest in reducing their carbon footprint but their vehicle-shopping behaviour doesn’t match those intentions.

The number of battery electric vehicles sold increased 50 per cent to 30,000 vehicles and hybrid sales also went up to the high 20 thousands, but these volumes remain a fraction of the overall market, DesRosiers said.

Light truck sales, which includes SUV, crossovers, pickups and minivans, rose 1.6 per cent to 1.43 million in 2019, with SUV sales alone topping 900,000 for the first time. In contrast, passenger and compact car sales plummeted about 16 per cent to around 485,000.

Consumers continuously choose to spend more money

J.D. Power’s Robert Karwel

J.D. Power’s Robert Karwel, senior manager of the Canadian automotive division, expects light truck sales to rise again in 2020 to capture about 80 per cent of the market.

“These types of vehicles are extremely suited to our geography and climate where people drive long distances on varied topography, dirt roads, snow,” Karwel said.

The shift is also a boon to auto dealers whose profitability is trending upwards thanks to the higher price tag attached to SUVs and crossovers, he said.

“Consumers continuously choose to spend more money,” he said.

The average price for a new vehicle in 2019 was about $36,000, Karwel said. The average has steadily increased by about $500 per year for the past decade, he added, which isn’t substantial but adds up over 1.9 million vehicles.

“Our main message to our clients is nobody panic, things are actually pretty good.”

Financial Post

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