Automotive News Canada - February 2022 - 19

* FEBRUARY 2022
19
Stellantis could
set a precedent if
successful rewriting
parts contracts
CONTINUED FROM PAGE 3
" These are tight markets
for everybody, and most
[automakers] have taken
the tack to partner on inflationary
cost pressures with
a healthy supply base and
say, 'Look, our interests are
mutual,' " Volpe said.
Volpe wondered whether
the new terms are because
of a change in corporate
culture resulting from the
merger last year between
Fiat Chrysler Automobiles
and PSA Group and a push
to grow Stellantis.
" It's probably driven by
accounting rather than anybody
doing strategic relationship
growth, " he said.
In the past, automakers
have used their buying
power to leverage concessions,
Lassaline-Berglund
said. As an example, she
cited " five by three, " where
suppliers were expected to
give back five per cent in
savings every three years;
or efforts by [automakers] to
dictate internal production
costs. Some suppliers went
bankrupt trying to meet
those standards, LassalineBerglund
said.
" This is a little similar, "
she said. " They want to play
hardball. "
ALL EYES ON NEW TERMS
Lassaline-Berglund is concerned
that other automakers
could emulate Stellantis'
strategy if it succeeds.
" I think they watch each
other closely, " she said.
Volpe agreed, saying that
while his sector has great
relationships with automakers
including Stellantis
Canada, " I do know that
in the industry, everybody
watches each other's terms
as closely as they can. "
Most of the companies
in CAMM and Automate
Canada are diversified and
don't rely completely on
automakers, having learned
from previous cost-cutting
cycles, Lassaline-Berglund
said. If Stellantis doesn't
soften its stance, these suppliers
will look for business
elsewhere.
" Many of the suppliers in
the supply base are not willing
to put all of their eggs in
one basket any longer, " she
said.
There has been talk of
challenging the legality of
the new terms. U.S. lawyer
Jonathan Jorissen
told Automotive News that
Stellantis' terms go against
the long-standing concepts
of " force majeure " or " commercial
impracticability, "
which excuse shortfalls that
result from unforeseen circumstances.
Such terms
have been used to deal with
the ongoing microchip shortage
affecting new-vehicle
production.
Litigation would be a
last resort, said LassalineBerglund.
" Let's
engage in some dialogue, "
she said. " Stellantis,
talk with your supply base. "
- ANC
- With files from John Irwin
and Vince Bond Jr.
January sales: New year, old story
Higher trade-in
values are somewhat
offsetting a lack of
incentives that are
increasing what
buyers are paying
By GREG LAYSON
DIGITAL AND MOBILE EDITOR
THE AVERAGE TRANSACTION
price of new vehicles sold in
Canada will continue to rise in
2022 amid ongoing
inventory shortages
and changing
consumer preferences
and as
demand continues
to outstrip supply, industry experts
say.
Several entry-level and lower-priced
sedans will exit the market
for good in 2022, with buyers
opting for higher-priced - and
higher-margin - crossovers and
utility vehicles, said Robert Karwel,
senior manager of the Canadian
automotive practice at J.D. Power.
For example, the Mazda6 and
Volkswagen
Passat sedans
aren't available as
2022 models.
" Vehicle pricing
is going to
increase because
of changes in the
mix and because
of what people are
buying, " Karwel
said.
" That is a
demand-driven
change. That's
going to keep
prices bubbling
upward.
" Our outlook
for all of this year
is that we expect
Karwel:
Prices set
records
seemingly
every month
last year, a
trend that's
likely to
continue.
FILE PHOTO
the high pricing to continue. "
The average transaction price
of a new vehicle sold in Canada in
2021 rose to a record $42,500, up 14
per cent from the previous year.
Some entry-level and
lower-priced sedans will
disappear this year in favour
of higher-margin vehicles. One
victim of the trend is the Mazda6.
PHOTO: MAZDA
MONTHLY
SALES STATS
P24
" It was essentially a new record
every month last year, " Karwel
said. " And I don't want to sound
like a broken record ... but if you
get the feeling when you're shopping
for a new car that everything
seems to be priced like a
chrome-plated Bugatti Chiron,
that's not that far off the mark.
There's nothing right now to tell us
that's going to change.
" That's also going to drive that
average transaction price higher,
so 2022 is going to be very similar
to 2021. "
Partially offsetting price - and
monthly payment - is that the
average trade-in value was up 26
per cent in 2021 and is expected to
remain high, said Karwel.
WHAT'S LOWER? INCENTIVES
Incentives - or lack thereof -
are also boosting the transaction
price. Incentives fell 29 per cent
in 2021, down to $4,200 per vehicle
from $6,000 in 2020.
" It's a misnomer to say there
are no incentives; they're still
out there, " said Karwel. " But in
Canada, we're such an incentivized
market, we've taken dramatic steps
down. ... Most of the incentive drop
was taken out of leasing and cash
discounting. "
Incentives are down 40 per cent
from 2019.
January sales were up an estimated
0.6 per cent compared with
the same period last year, to 91,411
vehicles, according to DesRosiers
Automotive Consultants. While
January is usually the slowest sales
month of the year, a discrepancy
remained between market demand
and supply, said Andrew King,
DesRosiers managing partner.
Scotiabank Economics' Rebekah
Young, who closely watches the
auto industry as the bank's director
of fiscal and provincial economics,
called January sales " disappointing
but not unexpected. "
" Inventory woes are expected to
persist through the year, " she said.
" Furthermore, Omicron likely had
some effect both in keeping consumers
at home as well as possibly
stalling the auto production [and
supply chain] recovery owing to
absenteeism.
" We expect first-quarter sales
will be relatively flat or mildly positive
at best, given the yearlong
recovery ahead. "
Young expects annual sales totaling
1.75 million vehicles, up from
1.66 million in 2021.
RISING RATES WON'T MATTER
" As the year advances, the cost
of vehicle ownership is expected to
continue to rise, including new-vehicle
price appreciation as well
as financing costs as the Bank of
Canada is expected
to start lifting
its overnight rate
this quarter, " she
said.
Even as prices
climb and interest
rate increases
loom - the
Bank of Canada
has signaled two
by year's end
- new-vehicle
pricing won't be
affected, Karwel
said.
" Just like we
have a red-hot
property marYoung:
Expects
first-quarter
sales
to
be flat and
vehicle
ownership
costs to rise.
FILE PHOTO
ket in Canada, we have a fairly hot
market for new vehicles, " he said.
" The first interest rate hike probably
won't do anything to demand. "
If automakers can solve the
inventory problem and even overbuild
at some point in 2022, Karwel
said, they can " pull the incentive
lever " to get people to continue buying
new vehicles. - ANC
See all listings and post your own
at: canada.autonews.com/people
FINANCE
NEW HIRE
Rick Valade
President
AutoCapital Canada and
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Toronto, Canada
NEW HIRE
Fausto Bonomo
Head of Sales and
Marketing
AutoCapital Canada and
ConsumerCapital Canada
Toronto, Canada
NEW HIRE
Allen Gerlings
Strategic Partnerships
and Sales Development
Leader
AutoCapital Canada and
ConsumerCapital Canada
Toronto, Canada
CanCap Group Inc., a Canadian specialty financial services and consumer lending provider,
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Automotive News Canada - February 2022

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