Automotive News Canada - June 2017 - v2 - 3

SECOND FRONT

Lots on the lot
Researcher warns
of impending sales
decline as new
vehicles languish
at dealerships
O T TAWA C O R R E S P O N D E N T

I mean, will I have some cars
that sit here 150, 200 days?
Yeah. Do I have a lot of cars
that are here for a week?
Yeah. I don't actually measure
my turn ratio on my whole
inventory.
DAN LAPORTE

Managing partner, Rivershore
Chrysler, Kamloops, B.C.

By STEVE MERTL
VA N C O U V E R C O R R E S P O N D E N T

firm says that 23 per cent of new
vehicles sold in the first quarter
this year were from the 2016 model
year.
By comparison, 15 per cent of
new cars sold in the first quarter
of 2013 were from the 2012 model
year. It is taking "substantially
longer" for dealers to clear out old
inventory.
"No one is overly concerned
with a growing days-to-turn, until
it starts to hit unbearable levels,"
Karwel said "It is generally agreed
that a days-to-turn in the 60s is still
acceptable."
Turn rates traditionally climb
in early months as dealers work to
sell the previous year's stock. But
the lag in 2017 is especially apparent for car models, which took an
average 100 days to sell in the first
quarter versus 68 for light trucks.

THE FUTURE OF DIESEL LIGHT VEHICLES
IN North America remains uncertain as the
Volkswagen emissions scandal ripples through
the industry.
Two major automakers have dropped diesels
entirely, but others soldier on.
Analysts suggest there is a small but steady
demand for diesels in North America, but the VW
scandal and technological evolution have dimmed
prospects for growth.
Volkswagen Group was the segment leader until 2015, when U.S. regulators accused the
German automaker of using engine-management
software to give lower emissions readings during
lab testing than when driving on a road.
Since then, other automakers, including
Mercedes-Benz, General Motors and Fiat Chrysler
(FCA) have also been accused of cheating.
VW Group announced last November it would
drop Volkswagen and Audi diesels from its U.S.
and Canada lineups as it shifts towards higher-efficiency gasoline engines and zero-emission electric vehicles.
Mercedes-Benz Canada told Automotive News
Canada last year more stringent emissions testing by the U.S. Environmental Protection Agency
(EPA) was delaying delivery of 2017 diesel models by up to two months. With no apparent end in
sight, Mercedes in May dropped diesels in Canada
and the United States for at least this model year.
It's not clear whether Mercedes-Benz, like VW/
Audi, will bail out of diesels entirely. But other
automakers suggest they're not deterred by the
regulatory crackdown.

INCENTIVES GROW

MAZDA ON TRACK FOR DIESEL CX-5

Industry-wide, car sales are lagging as consumers express a growing
interest in trucks and utility vehicles. ( P H O T O : G R E G L AY S O N )

"I certain don't think we're
going to go back to what happened
in 2007 and 2008 because the numbers aren't as dramatic," he said.
Leasing, for example, rose three
percentage points to 26 per cent
of new car transactions in the
first quarter of 2017 as consumers
looked for ways to reduce monthly payments. Compare that to a
near-50-per-cent rate in the Great
Recession: "If you can imagine,
nearly half of the cars on the road
were leased."
Perhaps more significant, however, are increases in how long
vehicles sit on lots.

DAYS-TO-TURN RATE CLIMBS
Automakers don't publicly
report inventory and the number of days to "turn," or sell a
vehicle in Canada, the same way
they do in the United States. But
J.D. Power, working with LMC
Forecasting, estimates there were
71 days to turn at the end of 2016,
up five days from the year before.
And the rate continues to climb,
hitting 80 days in the first three
months of 2017 as automakers hesitate to dial back production.
One consequence? The research

There's been a consumer shift
from cars to trucks, and "the pipeline cannot adjust quickly enough,
and cars are sitting on lots longer
and longer," Karwel said.

SEE WHAT'S DRIVING PAGE 26

TRANS-CANADA NEWS 5,000 KILOMETRES OF STORIES
Oldest Mazda dealer in
Canada marks 40 years

WINNIPEG - Gerry Gordon's
Mazda celebrated its 40th anniversary May 11, with the president of
Mazda Canada, Masaharu Kondo,
on hand to congratulate Canada's
oldest Mazda dealer.
David Klan, director of sales,
marketing and regional operations for Mazda Canada, said only
12 dealers in Canada were founded during Mazda's earliest days,
but only one retains the same
dealer principal, Gerry Gordon.
Klan credited Gordon with selling
12,000 vehicles over 40 years.
Gordon immigrated from
Northern Ireland in 1967 with $50
and a background in racing. After

Diesel's future
remains murky
in wake of VW
cheating scandal
Two automakers drop diesels
completely, others hold fast

By ROBERT BOSTELAAR

OTTAWA - Like a flashing highway sign, shifts in Canada's auto
market are warning of a slowdown
ahead.
New vehicles, especially traditional sedans, are taking longer to
sell, manufacturers are boosting
incentives and buyers are increasingly turning to leasing or longterm loans.
For J.D. Power Canada, the
trends signal a sales drop by 2018
after a spectacular five-year run of
gains.
"We still think it might be
another record year this year but
it's really next year - or say the
end of this year, beginning of next
year - when we see a downturn,"
said Robert Karwel, senior manager of the research firm.
Not everyone agrees that a slowdown is likely, and Karwel suggests whatever drop occurs could
be manageable for manufacturers
and retailers who prepare for a
changing market.

06.17

Dealers adopt trade-in
valuation tool

Mazda Canada president
Masaharu Kondo and Gerry
Gordon mark the 40th anniversary of Gerry Gordon Mazda in
Winnipeg. ( P H O T O : D AV E H A L L O C K )

owning a shop specializing in
British imports, he opened Gerry
Gordon's Mazda in 1977.

LONDON, Ont. - Mobiles Inc.
reports its Tradesii online tradein valuation tool has attracted 200
Canadian dealers signing on since
it launched in April on Kijiji.ca.
Tradesii uses data from valuator Canadian Black Book and
allows Kijiji users access to accurate trade-in values via a dealer's
web site in exchange for providing their contact information.
The London-based company said results suggest about 10
per cent of leads generated from
Kijiji are coming directly through
Tradesii and 20 per cent of those

SEE TRANS-CANADA PAGE 26

Mazda Canada still expects to launch the diesel CX-5 utility vehicle by the end of this year,
Public Relations Director Sandra Lemaitre said
via email, adding it should receive EPA approval
"in the coming
months."
"The EPA certification process
has taken longer than anticipated, but we
This fall, the Mazda CX-5 will
don't expect it
come with a 2.2-litre diesel
to impact our
engine. Certification took lonlaunch plans,"
ger than expected, but won't
she said.
Jaguar Land affect introduction plans.
(PHOTO: MAZDA CANADA)
Rover Canada
spokesman John
Lindo said the 2017 Jaguar F-Pace SUV and XE
and XF sedans using its 2.0-litre diesel, along with
a new Land Rover Discovery diesel, went smoothly through certification to reach dealer showrooms.
Turbo-diesel versions of the 2018 Chevrolet
Equinox and GMC Terrain are on schedule to
arrive later this summer, GM Canada product
and technology spokesman George Saratlic said.
FCA, being sued by the U.S. government over
cheating allegations, has applied for certification of its V-6 diesel used in the 2017 Jeep Grand
Cherokee and Ram 1500 pickup, using updated
emissions software that will also be installed on

SEE ANALYSTS PAGE 26

Table of Contents for the Digital Edition of Automotive News Canada - June 2017 - v2