Canada

Canadian New Vehicle Sales Print The Second Worst May In Over Two Decades

Canadians are suddenly pulling back on their new vehicle buying binge. Statistics Canada (Stat Can) data shows new vehicle sales grew on an annual basis in May. Sadly, it wasn’t because the market was experiencing robust growth. It was due entirely to the base effect of comparing sales to an early pandemic month. Zooming out, it was the second slowest May since 1997.

Why Do I Care About New Vehicle Sales? 

New vehicle sales are a huge signal for the economy. For someone to buy a new vehicle, they have to be confident in their ability to pay for it. If someone is confident about their ability to buy an expensive item, they have job stability. People confident in their future income continue to spend and borrow.

A similar observation can be made about truck buying and the housing industry. In a building boom, more contractors need more vehicles. If they’re being squeezed on margins because, oh, I don’t know, lumber made it unprofitable. They tend to stick with their own vehicle. That’s in addition to auto manufacturing being a large industry. A slowdown (or ramp up!) of new vehicle sales can actually tell us a lot.

Canadian New Vehicle Sales Had The Second Weakest May Since 1997

Canadian new vehicle sales are slowing, though the base effect muddles the numbers. There were 151,912 new vehicles sold in May, down 8.9% from a month before. Compared to a year before sales are 30.8% higher, though last year was extremely low, due to the pandemic.

Canadian May New Vehicle Sales

The number of new vehicles sold in the month of May. 

Source: Stat Can; Better Dwelling.

Excluding last year, it was the weakest May for new vehicle sales going back to 1997, or 24 years ago. Unexpected considering April and May are when new vehicles sales peak for the year. This year we’ve seen sales peak in March, along with home sales.

Breaking this trend down by segment, passenger cars took a big hit in the month. They represented 30,793 of the new vehicle sales in May, down 6.6% from a month before. Compared to a year before, sales were 22.2% higher. May sales numbers have been unusually slow for the past two years, but the overall trend has been weak as well. The pandemic’s rebirth of the car was a little more legend than reality, it would appear. At least in Canada.

Canadian New Vehicle Sales

Canadian new vehicles sales, including passenger vehicles (cars) and trucks.

Source: Stat Can; Better Dwelling.

Trucks on the other hand, now represent the majority of new vehicle sales, like in all building booms. Trucks represented 121,119 of the total vehicle sales in May, down 9.4% from a month before. Compared to a year before sales were up 33.3%, but remember the base effect. Other than last year, it was the weakest May for truck sales since 2016. That was right around when Canada’s real estate boom began. Memories.

Canadians Are Now Buying Cheaper Vehicles — Even Trucks 

Canadians are spending less on their new vehicle purchases as well. The average price was $45,334 in May, down 4.2% from the month before. Compared to a year ago it’s only up 1.3%, with little obvious base effect. New purchase prices peaked this past December, and are currently 7.0% below those levels. 

Passenger cars showed a sudden decline, indicating some weakness in the luxury segment. The average price fell to $37,421 in May, down 8.2% from the previous month. It was still 8.0% higher than last year, but some base or quality adjustments are likely in those numbers. This past March was the all-time record high, and the average is now down 10.0% from those levels. That’s also the month home sales, and new construction peaked as well. Everyone must have felt like big spenders that month. 

Canadian New Vehicle Average Price

The Canadian average sale price for a new vehicle sold that month, including passenger vehicles (cars) and trucks.

Source: Stat Can; Better Dwelling.

New truck prices didn’t fall by much, but it’s somewhat of a surprise to see weakness in the segment. The average sale price of a new truck fell to $47,346 in May, down 3.3% from the month before. Compared to last year the average is down just a minor 0.4%, though keep in mind how high inflation is. During a building boom, where labor was previously short, nonetheless.

New auto sales are slowing, and the average sale price is slipping lower. The latter is even more difficult to understand considering how high inflation is. The timing of sales peaking is also another warning flag, happening at the same time as home sales. Both of those things are supposed to be soaring while interest rates are near record lows, not falling. Where are all of those pent-up savings at? 

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19 Comments

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  • Abdul Islamovic 2 weeks ago

    I usually like the material from here but this article is missed the mark and didnt dive into the “why”. Not once has this article mentioned the chip or semi conductor supply constraints that are affecting dealers. New car lots that used to have over 100 vehicles are down in the mid teens. How can a dealership expect to sell when they dont have the inventory? Of course it’s going to be low.

    • Jay 2 weeks ago

      I work at a GM plant, and we haven’t slowed down production. I keep hearing there’s a chip shortage, but it’s definitely not impacting production. The summer slowdown usually means production slows, but we’re running full steam.

      Canada and the US are two very different markets though. Almost all of the vehicles are going to the US. A tenth of the cars in Canada was replaced over the past 2 years. How many do people think need to be bought?

    • DD 2 weeks ago

      Compere it to the us and you will understand why its much lower in Canada

    • Uri 2 weeks ago

      I agree Abdul, I am shopping for a new car, the inventory at its lowest level in years. This time editor went too doomsday then usual.

  • Marty Guy 2 weeks ago

    New vehicle sales are declining because we can’t get the inventory due to various factors from the virus from Wuhan to storms in Texas to chip shortages.

    • Rob Turner 2 weeks ago

      If it was the chip shortage, prices would be rising, not falling. A dealership sent out an email this week with a bunch of concessions. That doesn’t happen in “shortages”

      • David 2 weeks ago

        Not true, there is a legitimate massive new vehicle shortage, these concessions are misleading, discounts are at historic lows. Wholesale Used vehicles pricing is at record highs directly connected to new car shortage and strong consumer demand for cars.

      • DemdOLLA 2 weeks ago

        Depends on the vehicle Rob. For example try finding a Honda Ridgeline in stock or a 4 Runner. There is very limited stock and massive demand for all pickups and some SUV’s.

    • DD 2 weeks ago

      its opposite to the US

  • Axel McLion 2 weeks ago

    Isn’t there a shortage of supply due to chip shortages?

    • Rob Turner 2 weeks ago

      Yes, but that’s not the case in Canada, otherwise dealers wouldn’t be having clearance sales.

  • D 2 weeks ago

    Canadians are the most indebted people on planet earth. Too much liabilities, not enough assets.

  • questions guy 2 weeks ago

    barely anyone drove in 2020 compared to previous years… and there are supply issues (used car prices are way up)…

    I don’t think the analysis is spot on here

  • Joe 2 weeks ago

    This article is misleading. The new car sales are down in the past quarter due to a lack of new inventory caused mainly by a chip shortage. Manufacturers were idling plants for some time. New vehicles are sitting in huge lots waiting for the chips.

    https://www.cbsnews.com/news/car-sales-drop-record-high-prices-chip-shortage/

    • Ahmed 2 weeks ago

      Repeat after me. Prices don’t fall when there’s a shortage.

      Everyone is applying US deliveries but hasn’t walked into a Canadian dealership that will give you a buttload of concessions. I just bought a GM last month, and there was no issue with the inventory in stock. They even cut the price by thousands.

  • David 2 weeks ago

    This article is unfortunately off the mark. Here’s an article that explains some of what’s going on. Even though it speaks mainly to the U.S. market it’s the same here in Canada. I would be happy to explain in greater detail to the author if they wish to reach out to me.

    https://www.theglobeandmail.com/business/article-some-used-vehicles-now-cost-more-than-when-they-were-new/

    • Omar 2 weeks ago

      And there’s no concrete to build more condos, and no wood to build houses, so that’s why those aren’t selling.

      The author isn’t off the mark, because it doesn’t matter why the commodity isn’t being traded. It isn’t, which is a hot and slowdown to the segment regardless.

      If you really want to buy a t-short from me, and I don’t have any t-shirts, I don’t get the money. If I don’t get the money, I don’t spend it in the economy, and those people don’t get paid either.

      “Pent up” demand for vehicles may exist in a year, or may not. They may buy imports, or they may not.

      If you’re long car, you’re short on the city. If you’re short on the city, you’re looking at a bad economy anyway

  • Jon Bathmaker 2 weeks ago

    There are also deferred purchases as buyers are waiting for the new round of EVs. Ford’s electric F-150 has bound to have put a damper on ICE pickup sales as the value proposition for EVs is hard to reisist.

    • GrnDl 2 weeks ago

      You would think that’s the case but that’s not what’s actually happening. ICE Pickup trucks are a hot commodity all around especially in the U.S. And ICE pickups are not going anywhere until EV range reaches at least 1000km in extreme climates, conditions, and full load towing capacity along with price parity. The 500km range you see today is what can be achieved in optimal conditions and is simply not enough for for professional use. Hydrogen fuel cell is the true ICE killer but it still has a long way to go and for now EV seems to be the choice for regular passenger vehicles.

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