Automotive News Canada - October 2020 - 27

* O C T O B E R 2 0 20

Suppliers for GM or Honda have a foot in two doors
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major high-tech vehicle hub centred in
Oshawa, about 100 kilometres away.
"The physical proximity behind
the two make it probably the easiest
place to collaborate in North America
in this agreement," said Volpe. "It
isn't just a sales office here and a sales
office there. We are doing serious R&D
in the areas of focus of the [GM-Honda
agreement]."
Volpe predicted the alliance would
expand the GM-Honda presence in the
province. "It is the only place in North
America where you have a globally
relevant automotive cluster overlaid
with a globally relevant IT cluster."
He estimated that the two auto
giants make direct contributions

sense and serviceability in everything
in excess of $10 billion a year to the
they do. On the other side, Honda can
Canadian economy.
learn from the latest
The deal represents
in tech space. GM is
a chance for a foot in
really leading the race
the door for suppliers with one or the
in tech."
other automaker, said
Suppliers lookBilton, who estimated
ing to upgrade their
that 50 to 75 per cent
operations can
tap into Ontario's
of Ontario Tier One
three-year, $10-milsuppliers do work for
lion Automotive
General Motors, while
Modernization proup to 25 per cent supply Honda.
gram, which is now
Volpe: Predicts increased
The automakers'
in its second flight of
GM-Honda presence in Ontario.
strengths complelending, Bilton said.
FILE PHOTO
ment each another,
The GM-Honda
which also bodes well
agreement was also
for suppliers, said Bilton.
likely spurred by the United States"Honda puts practicality, common
Mexico-Canada Agreement, which

KARWEL: TWO PROBLEMS FOR SALES GOING FORWARD

No stock, and no new stock
CONTINUED FROM PA GE 1

- is why some automakers saw sales
increases while others posted declines
during the third quarter.
Hyundai and
Kia, for examSALES ANALYSIS
ple, saw their
third-quarter sales
increase 2.5 and 14.7 per cent, respectively. But Fiat Chrysler and General
Motors saw sales fall 10.8 and 10.5 per
cent, respectively. Ford managed to
increase sales by 8.5 per cent in the
quarter.

problems going forward are the transition to model year 2021 is really slow;
we just can't get '21s out there fast
enough.
"The other thing is we aren't going
to have that 2020 clear-out because all
those cars are gone. There's still going
to be tight supply in the fourth quarter and well into the new year."
The shortage comes as sales, particularly on the retail side, continue
to rebound, generating an estimated
KOREA SUPPLIES STRONGER
2.4-per-cent, year-over-year increase
in September, according to DesRosiers
A lot of it has to do with where
Automotive Consultants (DAC).
the vehicles are made, Chipman and
"Having the automotive
Karwel said.
market back in positive
"I think the Korean
territory for a month is a
brands, when COVID hit,
huge step forward for the
didn't have as many manindustry" Andrew King,
ufacturing issues. They
DAC managing partner,
were very strict in South
said in a statement.
Korea, in how they hanTotal new-vehicle
dled it. They had an unbesales in the third quarlievable contact tracing
ter declined just 3.9 per
program. So, they were
cent to 503,114, according
able to get manufacturing
to the Automotive News
faster," Chipman said.
Data Center in Detroit.
The number of new
Year-to-date sales, meanvehicles sold in Canada
while, were down 23.6
that were assembled in
Chipman: Low on Ford
per cent.
South Korea in the third
and Chevrolet trucks
quarter was up 11.4 per
and sold out of the Kia
'CAN'T GET INVENTORY'
cent to 52,330, according
Sorento, and there aren't to the Automotive News
The supply shortage
enough Honda Civics
Data Center. The number
is making it difficult to
and Toyota Corollas.
of North American-made
know which brands are
FILE PHOTO
vehicles fell 3.5 per cent
selling well, or could be,
to 372,204.
if lots were fully stocked.
"Simply put: Manufacturers that
Steve Chipman, CEO of Birchwood
were successful have the supply,"
Automotive Group in Winnipeg, said
Karwel said. "Others, that were more
he normally has four months' worth
challenged, don't have the supply."
of supply, but he currently has two,
As a result, dealer lots are still
at best. And that's an average over all
sparsely populated. On Jan. 1, the
makes and models.
average number of days to turn - or
"I have zero months of supply of
how many days a new vehicle would
some vehicles and six months supply
sit on a lot before it sold - was 70.
of others."
Chipman said he's thin on Ford and At the height of the pandemic, that
number was 115 days. It's now at 85,
Chevrolet trucks, and is completely
according to J.D. Power.
sold out of the Kia Sorento. As well,
Karwel said "we're getting closer"
there aren't enough Honda Civics and
to monthly sales numbers seen last
Toyota Corollas to meet demand.
year and prior to the pandemic.
"We cannot keep up our sales.
And consumers have been visiting
We can't get inventory," he said.
dealerships as they redirect disposable
"Inventory levels won't catch up until
income from vacations and sporting
at least the new year. For the next 90
events to big-ticket purchases, such as
days that's the biggest problem."
vehicles, said Chipman.
Inventory - either ample or thin

"If you're someone who has season
tickets to the Jets or the Maple Leafs
or whatever, you just saved yourself how much money? What are you
going to do with that money? People
are going to want to spend it. But they
can't go on a trip, they can't go on a
vacation. So, they're spending money
on a car."

INCENTIVES ON THE OUTS
Tight inventories mean automakers are not splurging on incentives,
Karwel said. "You'll absolutely be
able to buy a car, but you won't get as
much of that clear-out bonus as you
normally see on hoods of cars this
winter."
As it stands now, incentives are
down, while transaction prices, gross
revenue and profit margins are up,
Karwel said.
"Dealers are making more money
on both new and used vehicles. We're
still surprised to see how strong retail
has been over the last couple months.
We're getting back closer to last year's
numbers but with much higher transaction prices."
The average transaction price per
new vehicle is $37,000, up six per cent
or $2,000 over last year, said Karwel.
The price rose because older consumers, perhaps retired or at least
secure in their careers, didn't delay
purchases when dealerships reopened,
and flocked to higher-priced vehicles.
"The lack of buyers on the other
[lower] end affected the transaction
price," Karwel said.
Exactly what people are buying
continues to change, too.
Karwel said he was surprised at the
continuing shift to light trucks from
sedans.
"The proportion of people that [are]
still switching out of passenger cars
to light trucks is a phenom that is not
slowing or stopping," Karwel said.
Eighty per cent of all new vehicles
sold during the last quarter were light
trucks, Karwel said.
"In some months, we're hitting
almost 82 per cent," Karwel said. "It
goes to show you how much passenger
cars have fallen out of favour.
"We're running out of sedans and
hatchbacks to erode. We're probably
going to be somewhere around a ratio
of 85-to-15."- ANC

gives preference to vehicle and parts
production on the continent, said
Volpe.
The agreement between Canada
and the European Union could provide an export opportunity for Honda's
Alliston plant, Volpe said.
"Honda is looking forward to taking advantage of the tariff-free quotas
from their Alliston plant, and so this
might also have a window across the
Atlantic.
"I think Honda of all the Ontariobased production lines has product geared best for Europe and they
have expressed as much publicly.
Being the designated lead global plant
on Civic means that there might be
some auxiliary benefit from whatever
(GM-Honda) arrangement." - ANC

Ducharme says
his successor
needs political
relationships
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Ducharme became managing partner in 1981 and in 1996 sold his shares
back to go into politics.
His record there includes serving as
Conservative Party whip, minister of
community development, chairman of
the Francophone Secretariat, co-chair
of the Alberta Energy Research
Institute, deputy chairman of the special standing committee on members'
services and deputy chairman of the
standing committee on legislative
offices.

TOUGH JOB AWAITS
His successor, he
said, needs to forge relationships with policymakers.
"He also has to get
to know the provincial
transportation minisMcManes:
try and develop a work- Chief
ing relationship with
concerns are
the politicians. The job the economy
is all about building
and
relationships in order
inventory
to operate smoothly."
shortages.
The board of direcFILE PHOTO
tors of the MDA is
conducting a countrywide search for
Ducharme's replacement who will be
appointed after interviews are conducted.
Asked whether he thinks the MDA
should step up political activism such
as the fundraising campaign undertaken to help defeat the NDP government in the last provincial election,
Ducharme said he doesn't think so "at
this time."
"It was necessary then. The current
UCP government is in the second year
of its mandate," he said. "And, among
other things, they've got COVID to
deal with.
"It's in the first two years when the
heavy lifting gets done and some people are always unhappy. It's the last
couple of years when a government
institutes more popular policies and
measures in the interests of getting
reelected." - ANC

Automotive News Canada - October 2020

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