2009.01.15

In spite of the economic turmoil south of the border and in much of the rest of the world, Canadian new-vehicle sales of 1,635,986 units for 2008 were the third-best ever. And at that, they were just 1.1 percent behind second best (2007). But a significant downturn in the final two months signals that the world’s economic woes have finally caught up with us as well.

New-vehicle sales in Canada blazed away at record pace through the first three quarters, with not much more than a hiccup during that period to adjust to reduced leasing support. But they fell off by 10.3 percent in November and 21.2 percent in December, relative to 2007. In fact, sales for both months were the lowest so far in this century.

[CLICK HERE TO VIEW DETAILED SALES RESULTS]

Full-year results
Over the full year, most of the decline came at the expense of the Detroit Three, whose collective sales were down by 7.9 percent. Individually, Chrysler’s were off 4.9 percent, Ford’s 5.9 percent and General Motors’ 10.9 percent - significant, but not nearly as dramatic as for their U.S. counterparts.

Other decliners for the calendar year included: Acura (-3.7%); BMW (-3.3%); Land Rover (-22.6%); Mazda (-1.9%); Porsche (-15.3%); Saab (-29.0%); and Volvo (-26.7%).

Most of the import-brand nameplates increased their sales, however. Collectively they were up by 6.3 percent, claiming a 51.9-percent market share - the first time ever that they have outsold the Detroit Three on an annual basis.

Among those with not only increased but all-time record sales were: Audi (+12.6%), Honda (+1.2%), Lexus (+12.0), Mercedes-Benz (+26.4%), Mini (+32.5%), Mitsubishi (+11.7%), Subaru (+20.5%) and Toyota (+11.3%). Suzuki’s sales (+12.0%), as well as Volkswagen’s (+8.4%), also increased, although they were short of record levels.

For the first time, Toyota’s full-year sales surpassed those of both Chrysler and Ford, moving the Japanese brand into second place, behind only General Motors. In the process, Toyota’s market share increased from 11.4 to 12.8 percent - the greatest share increase of any manufacturer.

GM suffered the greatest loss of market share - from 24.1 to 21.7 percent - while Chrysler and Ford each gave up 0.6-percent share.

There was a reshuffling of the order among luxury brands as well, with Mercedes-Benz moving up a spot to second place, behind BMW, at the expense of Acura.

Truck sales for the year declined by 6.4 percent, while passenger car sales were up 3.9 percent.

December drop-off
Overall vehicle sales in Canada were down 21.2% in December to 94,423 units, versus the 119,894 sold in December 2007. The pain was wide-spread, with the sales of import nameplates off 21.6 percent to the Detroit Three’s 20.9 percent.   

Land Rover (-43.8%), Honda (-42.4%) and Saab (-41.3%) sales suffered the most on a percentage basis. But there were also several other double-digit decliners - some unaccustomedly so. They included: Acura (-29.8%), BMW (-18.1%), Chrysler (-35.9%), GM (-18.9%), Jaguar (-25.5%), Kia (-12.6%), Lexus (-25.9%), Nissan (-18.7%), Porsche (-13.6%), Smart (-38.8%), Toyota (-36.2%) and Volvo (-32.7%).

In spite of the broad-based carnage, some nameplates actually increased sales in December. They included: Audi (3.5%), Infiniti (16.6%), Mercedes-Benz (12.5%), Mini (4.9%), Subaru (16.0%), Suzuki (31.6%) and Volkswagen (82.5%).

As was the case throughout most of the year, truck sales were off more than those for passenger cars, by 25.8 vs 15.6 percent.

There is no single reason for the sudden and dramatic sales decline in November and December, says industry analyst Dennis DesRosiers of DesRosiers Automotive Consultants. The economy, the credit crisis, a freefall in consumer confidence, the weather and the negativity in the media all played a role, he says. But he puts the difficult economy over the last few months at the head of the pack.

"One of the variables I watch very closely is employment numbers," DesRosiers says. "If you are unemployed or are threatened with unemployment the last thing you would do is go out and buy a new vehicle... the numbers are in the toilet and this would explain much of the decline the last few months. The credit issue is less an issue in Canada than in the US since our banks continue to lend to credit-worthy vehicle buyers."

He notes, however, that "leasing is down due to the ABCP crisis and it has been real hard for the industry to convert those leasing customers to CFC customers. There is about a hundred dollar a month difference between a lease and a CFC and that is enough to send buyers scurrying. And with the industry in bad financial shape there has been a distinct decline in incentive money so a hundred dollars a month is tough to overcome."

Now what?
There is little doubt among industry analysts that the November-December downturn is a prelude to continued sales declines in 2009. DesRosiers is forecasting sales of "a little over 1.5 million" for the year - a decline of about nine percent from 2008 and the lowest result in a decade.

Scotiabank economist, Carlos Gomes, is even more pessimistic, with a forecast of 1.475 million units - a double-digit decline. Sales will be hardest hit in Ontario, he predicts, with a drop of 14 percent to 506,000 units, from an average of 594,000 units over the past five years. But every region will post lower volumes in 2009, he predicts, as employment weakens across the country.

That said, Gomes expects a leveling off and a slight uptick in the global economy during the second half of the year. It is to be hoped! 

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