Automotive News Canada - December 2020 - v2 - 29

* D E C E M B E R 2020

The auto sector could recover
more quickly than others
CONTINUED FROM PA GE 3

get vaccinated. Anita Anand, federal minister of procurement,
acknowledged during a Dec. 14
news conference that Canada is
dealing with an " incredibly competitive global environment "
when it comes to securing vaccines.
A post-COVID-19 recovery will
likely be " K-shaped, " Hall said,
meaning certain sectors of the
economy will recover faster than
others. The auto industry could
have a fast recovery that would
make it " among the stars " of the
recovery, Hall said, while other
sectors, such as aviation, could
take longer to rebound.
The North American auto
industry has performed relatively
well during the pandemic, at least
in part because new-vehicle customers have fared better econom-

ically than others. Affluent buyers, buoyed by a booming stock
market, managed
to build up savings.
Eric Lyman,
chief industry
analyst for residual-value forecaster ALG, told sibling publication
McCabe:
Automotive News
The timing
that while highof the 2021
er unemployment
recovery
usually stranremains
gles new-vehicle
uncertain,
demand, " the cusbut
tomers that purinformation
points to the chase those [new
and late-model]
end of the
first quarter. vehicles were less
impacted than
FILE PHOTO
some of the lower-income workers. "
For auto manufacturers, however, the coming months are

fraught with risks as COVID-19
cases increase. Another shutdown
could imperil many Canadian
suppliers, said APMA President
Flavio Volpe.
" I no longer worry in a very
real sense about a full shutdown, "
Volpe said in an interview. " But
it goes without saying that a lot
of companies' balance sheets are
freshly injured from the first
industry shutdown [and] would
not be in a good place if we went
there again. Some would not survive. "
The industry will continue to
abide by COVID-19 safety procedures in the coming months to
prevent such a scenario, he said.
" It's business as usual, which
has worked the last few months, "
Volpe said. " Do all the contact
tracing and proper separation,
then you have no problems. "
- ANC
- With files from Jamie Butters

A matter of time before
an automaker from China
looks to North America
CONTINUED FROM PA GE 3

LLC, speaking during the APMA conference.
McCabe said it was only a matter of time before one
of them announces plans to begin producing vehicles in North America.

NORTH PORTAL
" We believe the best way is through the north, "
McCabe said, adding that Canada would make sense
as an entry point into the North American market given the country's talent base and the government's recent emphasis on investing in innovation.
Ottawa and Queen's Park have been involved in
this year's investment plans from the Detroit Three
automakers in Canada. The governments are contributing a total of $590 million to Ford Motor Co.'s
$1.8-billion plan to transform its Oakville, Ont., facility into an electric-vehicle plant by 2026. The governments were also believed to be at the table for
multibillion-dollar investments by Fiat Chrysler
Automobiles and General Motors Co., though no
funding commitments were announced as of press
time.
New assembly plants in Canada have been rare in
recent decades. The most recent plant opening in the
country was Toyota Motor Corp.'s Woodstock, Ont.,
factory in 2008. - ANC

The future looks bright, but the first quarter will be a hurdle
CONTINUED FROM PA GE 1

Toronto and the neighbouring municipality of
Peel began their own provincially mandated fourweek lockdowns Nov. 23. And Montreal was in
Quebec's " red zone " - the most restrictive level of
COVID-19 response - throughout November and
into the beginning of December.

OPEN DOORS, CLOSED SOCIETY
The measures are hammering new-vehicle sales,
according to Scotiabank Economics. The financial institution estimated that
SALES ANALYSIS new-vehicle sales in November
fell 9.5 per cent, while DesRosiers
Automotive Consultants Inc. said sales were down
10.4 per cent to 128,351 units.
" More stringent lockdowns across major cities
and regions in the country are likely the key driver behind the slowdown even though dealerships
have remained open, " Scotiabank's Rebekah Young
said Dec. 1 in her online Auto News
Flash.
DesRosiers agreed, predicting
sales will end the year down about
20 per cent compared with 2019.
Scotiabank forecasts annual sales
of 1.56 million units, down about 19
per cent from the 1.92 million sold
in 2019.
Young:
" Anticipated second waves
Aside from
[of COVID-19] had been expectrestrictions
ed to dampen the auto sales recovto combat
ery, in line with actual November
COVID-19,
performance, " Young said. " We
year-end sales expect sales to remain depressed in
are being
December. "
hurt because
Jeff Schuster, president of the
of fewer
Americas operation and global vehiincentives.
cle forecasting at LMC Automotive,
FILE PHOTO
foresees more restrictions on the
horizon that will create " some headwinds on the
consumer's ability to get to the dealership. "
The first quarter is most at risk in 2021 because
" we won't have a full vaccine rollout, " and COVID19 cases " won't disappear in the first quarter, "
Schuster said.
Still, consumers have " an appetite to continue to
purchase vehicles and that's not going away. "
Consumers just can't easily make their way to the
showrooms, Schuster said, and the buying process
has become somewhat constrictive.
Lean inventory " is also having an impact and will
probably be with the industry for a few months to

An auto hauler loaded with Ram pickups makes its
way to a railyard in Windsor, Ont., Dec. 14. COVID-19
restrictions hurt consumer confidence, but they also
make it harder for potential buyers to get to dealer
lots in the first place. P H O T O : G R E G L AY S O N

come, " Schuster said. Automakers, he said, " have a
tendency to funnel most of their inventory into the
U.S. right now. "
Inventory levels vary by brand, he said.

IMPORT ADVANTAGE
Among the automakers that still report sales
on a monthly basis, lower-volume sellers such as
Kia, Subaru and Volvo all managed increases in
November. But high-volume sellers Toyota and
Honda posted declines.
Part of that is a result of where
vehicles are manufactured. Toyota
and Honda assemble several models
for Canada in North America. The
others import vehicles from overseas.
" Those that are coming from
Japan or Korea ... the shutdown
Schuster:
period wasn't as severe ... so the
Canadians
restriction on vehicles imported
still want to
from those markets is a little less, "
buy vehicles,
Schuster said.
so the
" Affordability is also an issue.
industry just
We're seeing a continued rise in
has to get
transaction prices. "
past the first
Said Scotiabank's Young: " Fewer
quarter of
purchase incentives may also be
2021.
creating some headwinds to sales as
FILE PHOTO
the end of the year approaches. "
But not every region is suffering. Steele Auto
Group of Dartmouth, N.S., posted an eight-per-cent
increase in November at its 45 dealerships, most of
them in Eastern Canada. December was off to a better start than the same period a year ago, said Steele

President Kim Day.
" Atlantic Canada has fared much better than
Ontario or Quebec when it comes to COVID, " Day
said. " We've not been locked down again. Consumer
confidence appears to be high, and there's more disposable income than ever before. "
It might be a while before the rest of Canada is at
that level, said Schuster of LMC Automotive.
" But if everything goes the way it's expected,
we're going to see a pretty strong increase from the
deeply depressing levels we saw in the second quarter of this year, " he said. " There's reason to be
optimistic. " - ANC

November to remember:
Prices reach record
By GREG LAYSON

D I G I TA L A N D M O B I L E E D I T O R

WHILE SALES IN CANADA MIGHT BE ON THE
decline, transaction prices continue to reach new
heights.
J.D. Power Canada said the average in
November rose to $39,300, the highest recorded
by the research firm. That's up 11.6 per cent from
November 2019 when the average was $35,200.
Plenty of reasons account for the spike, said
Robert Karwel, senior manager of J.D. Power
Canada's Power Information Network.
Incentives are down year over year, he said,
mainly because dealer lots have a limited selection as a result of lockdowns that idled production from March through May.
People are also opting to buy pricier pickups
over less-expensive sedans, and some pent-up
demand continued into November.
" All of these factors drive increased pricing
for Canadians, " Karwel said.
November marked the second month this year
in which the transaction price cracked $39,000.
It was $39,100 in April, at the height of the first
wave of COVID-19 and the corresponding restrictions.
Karwel said, however, that the rise in prices is
" unsustainable. "
" If we go back to, and retain, 1.8-million-unit
volume next year, " he said, " it won't be at an
average of $39,000 per unit. " - ANC

Automotive News Canada - December 2020 - v2

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