New vehicle sales in Canada are down for the second year in a row in 2019, with analysts expecting sales to drop again for 2020 given economic uncertainty and longer vehicle lifespans.
Despite lower sales however, Canadians are spending more money per vehicle as they move from cars to light trucks. SUVs, crossovers, pickups and minivans accounted for three quarters of total vehicles told for 2019 according to analyses from DesRosiers Automotive Consultants and J.D Power.
Canadians purchased roughly 1.91 million vehicles last year, down 3.6 per cent from 1.98 million vehicles in 2018, according to DesRosiers. Despite this, 2019 was still the fourth best sales year on record, said DesRosiers. The analyst said in a statement that he see’s a plateau in the market, “there’s very little threat of a downside but also a 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 factor at play are increasing vehicle lifespans. In 2000, a vehicle’s expected lifespan was anywhere from 15-18 years while according to DesRosiers, a vehicle purchased today can last up to 30 years.
In terms of fuel efficiency, his research shows that Canadians express interest in reducing their carbon footprint but vehicle shopping behavior 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 dropped about 16 per cent to around 485,000. 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.
The shift is seeing the profitability of auto dealers 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.”