Automotive News Canada - January 2024 - 26

26
* JANUARY 2024
Canada began talks with
Honda 18 months ago
CONTINUED FROM PAGE 1
" The idea of getting a large battery
plant or new vehicle assembly plant
is going to be important to every politician
from Ontario on down into
Mexico, " Fiorani said. " Luring them in
is a big deal and a big gain for employment. "
Canada's
industry minister,
Francois-Philippe Champagne, first
engaged with Honda on the topic about
18 months ago.
CANADA'S TRADE ADVANTAGES
In July 2022, he met with Honda
executives and also pitched to the
Keidanren (Japan Business Federation)
the importance of a Canadian electric-vehicle
battery supply chain.
He spoke about new business
opportunities in the context of the
Comprehensive and
Progressive Agreement
for Trans-Pacific
Partnership (CPTPP),
which gives Japan companies
duty-free access
to the North American
market through
Canada.
The CPTPP is a " very
important agreement, as
it puts all vehicle manufacturers
and distributors
on a level playing
field in the Canadian
market for the benefit of
consumers, " said David
Adams, president of the
Global Automakers of
Canada, which lobbies
chain - isn't a done deal.
I think 100 per
cent we are
shortlisted.
Flavio
Flavio
Volpe
APMA
president
on behalf of overseas automakers.
Not so coincidentally, vehicles are
the No. 1 import to Canada from Japan,
according to the federal government.
The CPTPP lowers the cost of Japan
automakers to import their products.
On a second trip to Japan in
November 2022, Champagne held a
roundtable with members of the country's
Battery Association for Supply
Chain to discuss investment opportunities
in Canada's EV
battery ecosystem.
Then in
Bordignon:
Honda is
" considering
various
options " as
it moves into
the EV era.
FILE PHOTO
September, Canada
and Japan signed a
battery supply-chain
agreement, the first
such deal Japan had
ever signed.
At the time,
Champagne was coy
about what kind of
Canadian subsidies
could follow to lure
Japan battery makers
into Canada,
though he and
Natural Resources Minister Jonathan
Wilkinson both mentioned that discussions
were under way with Toyota and
Honda.
On Jan. 12, Champagne's office confirmed
that he met with Honda executives
before Christmas, just weeks
before the Nikkei report.
Other top federal officials, including
Finance Minister Chrystia Freeland
and Mary Ng, minister of export promotion,
international trade and economic
development, have also met with
Honda.
HONDA WEIGHING OPTIONS
But the prospective project - which
would be more than double the value of
other recent multibillion-dollar investments
in Canada's EV battery supply
Honda plans to begin production and
sales of EVs in North America in 2026,
based on its new Honda e:Architecture,
and announced plans for an all-electric
product line - Honda 0 - at CES
in Las Vegas in January. Until then, it
will have just one battery-electric
vehicle for
sale: the Prologue, built
by General Motors on its
Ultium battery platform.
In 2022, the automaker,
with partner
LG Energy Solution,
had announced Ohio
as the site of a planned
$4.4-billion joint-venture
battery plant. Honda
remains " focused " on
this site but is also
weighing other " initiatives "
as it shifts to EVs,
said John Bordignon, a
Honda Canada spokesperson.
" We
are considering
various options to increase local production
capacity, " he said. " However,
we have nothing further to share at this
time. "
STIFF COMPETITION
Champagne's office said both the
government and Honda are keeping
their cards close to their chest but that
Honda will need to meet with multiple
levels of government and departments
in the coming weeks and months.
The investment isn't a certainty,
said Flavio Volpe, president of the
Automotive Parts Manufacturers'
Association (APMA). He is encouraging
the federal government to " partner with
Honda. "
" I think 100 per cent we are shortlisted, "
Volpe said.
Fiorani said Ontario has a " leg up "
over most competing regions because
of its existing auto supply base, its raw
materials and the support for battery
supply-chain investments that the government
has demonstrated over the
past few years.
Still, with both the United States and
Mexico also competing for automotive
investments, competition will be stiff,
he said.
Progress on siting another North
American EV campus is a positive
development for Honda as well, Fiorani
said, as the company's electrification
strategy has moved in " fits and starts "
so far.
" Getting their plans moving will be
a big deal, " he said, " and this should be
a sign that they are moving in the right
direction. "
The Nikkei report said Honda
expects to make a decision by the end of
this year and bring the new facility on
line as early as 2028. -ANC
- David Kennedy contributed
to this report.
to keep fewer vehicles on the lot because
less supply creates more demand and higher
margins, while higher interest rates make it
more expensive to keep a lot filled to capacity.
Until
the Honda 0 product line
arrives, the company will have just
one battery-electric vehicle for sale:
the Prologue, built by General Motors
on its Ultium battery platform.
PHOTO: HONDA
PAYMENT PAIN
Those same interest rates also have made
monthly payments more expensive.
Karwel said his data shows that the average
monthly payment ended 2023 " well over
$200 higher " than it was pre-COVID-19,
while lease payments
were up $300 a month
from 2019.
Karwel: " One
thing that
impresses
me is the
resilience
of Canadian
consumers.
We asked a lot
[from them]
last year, and
people were
still picking up
those cars. "
FILE PHOTO
The average transaction
price - which
broached the $50,000 plateau
once in 2023 - ended
at about $49,500, Karwel
said. The final figure isn't
yet available.
" That is unsustainable,
unless you consider
that last year as your new
baseline, and we're going
to be measuring forward
from that, " he said.
By historical standards,
interest rates
aren't high, Karwel said.
The Bank of Canada's
overnight lending rate
started the millennium
at six per cent and fell to
as low as 0.25 per cent during the height of
the pandemic. More recently, the bank held
its overnight lending
rate steady in each of
the final three decisions
of 2023.
The rate is currently
five per cent,
up 4.75 percentage
points since March
2022.
" One thing that
impresses me is
the resilience of
Canadian consumers, "
Karwel said.
" We asked a lot of
the consumers last
If 2023 sales are the new normal,
then 2024 will likely be normal
CONTINUED FROM PAGE 1
For the fourth quarter, sales were up an
estimated 17.2 per cent.
AFFORDABILITY PROBLEMS?
While consumer sentiment remains positive,
new vehicles are becoming less affordable,
and that has dealers asking for the
return of incentives to help move sales.
" As inventories start growing, and the cost
of that inventory has tripled, " Reuss said,
" you can rest assured that our members are
having those strong conversations with their
respective manufacturers
that the consumer interest
needs to be there in order
to move those units. "
SALES ANALYSIS
Q4 STATS/P29
Because of affordability issues, Karwel
said the less expensive compact and subcompact
SUV segments are " red hot. " Sales of
full-size pickups - with monthly payments
usually more than $1,000 - need a nudge.
The smaller vehicles are taking about 25
days to sell from the time they arrive at dealerships;
full-size pickups are taking about 65
days.
To keep the trucks moving, Karwel said
some automakers have fallen back on zeroper-cent
financing for 60 and 72 months.
But consumers also have additional buying
power now, he said. Trade-in values are
high and negative equity low.
" Those two things are going to sustain us
through some headwinds, " Karwel said.
He forecasts that automakers will sell 1.7
million new vehicles in 2024. CADA's Reuss
predicts 1.75 million but he thinks potential
exists for more, eventually.
" Even though the market is going to be
1.75 million, it's not necessarily with the best
sort of economic preconditions, "
he said.
" With good economic
preconditions being
in there, I see no reason
why at some
point in time the market
could come back
to the two-million
level. "
Ford sales were flat in 2023, bucking
the upward trend for most automakers.
F-Series pickup gains were offset by
losses for several utility models, such as
the Bronco and the Explorer. PHOTO: FORD
year, and people were still picking up those
cars. "
Demand remains pent-up dating back to
the pandemic, Karwel said, but how much
remains to be seen.
" It's a balloon, and we keep deflating it, "
Karwel said. " There's something left, but
no one knows how much is left in there. "
14 MONTHS OF SALES INCREASES
According to the Automotive News
Research & Data Center in Detroit, automakers
who have reported sales figures
for 2023 sold 1.7 million vehicles, up 12.6
per cent from 2022. DesRosiers Automotive
Consultants (DAC) said automakers sold
1.66 million vehicles last year, up 11.8 per
cent over 2022, which was mired in microchip
and inventory shortages.
The 2023 sales percentage increase was
the biggest since 1997, according to DAC.
Last year's sales were bolstered by
improved vehicle supply, particularly in
the second half of the year, along with pentup
demand. DAC estimated that one million
sales were lost between 2020 and 2022
because of inventory shortages.
With December sales at an estimated
120,000 vehicles and up 10.7 per cent from
the same month in 2022, the market has now
seen 14 consecutive months of year-overyear
growth.
December sales were up in all provinces,
" as supply and demand work their way
back into a more balanced equilibrium, "
DAC said.
HOW THEY FARED
Several automakers
reported massive
gains in 2023.
Mitsubishi sales skyrocketed
61.6 per cent to 35,708, while the
Volkswagen brand saw sales rise 35.8 per
cent to 63,757. Total Honda sales spiked 20.7
per cent, while General Motors' sales were
up 15.4 per cent, with Buick surging 42.2 per
cent.
GM led the country in total sales at 263,084.
" GM Canada's incredible sales results
in 2023 are a reflection of
strong customer demand, "
said Kristian Aquilina,
who became GM Canada
president on Jan. 15.
" After a couple of years
of supply-chain challenges,
we substantially increased
vehicle inventory in 2023
to meet this demand
across our brands.
" We will build on that
momentum in 2024 as
we continue to launch
new vehicles in both ICE
[internal-combustion
engine] and EV segments
and focus on delivering an
exceptional customer experience. "
Ford Canada, which now reports only
year-end sales, was basically flat in 2023
compared with 2022. Total sales, including
Lincoln, of 239,790 vehicles trailed GM by
more than 23,000. Significant gains for the
F-Series pickup, Bronco Sport utility vehicle
and the Transit van were offset by losses for
the Bronco, Escape and Explorer utility
vehicles. -ANC
Aquilina: More
inventory to
satisfy high
demand led
to " incredible
sales results
in 2023 " for
GM Canada.
PHOTO: GM
Automotive News Canada - January 2024

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