Automotive News Canada - April 2024 - 10

10
04.24
OPINION
When demand falls,
so do vehicle prices
We learned
during the
pandemic that
automakers can
charge more for
vehicles when
demand outstrips
supply. It stands
to reason that
the opposite
is true when
demand falls.
IS THE VEHICLE-AFFORDABILITY
problem in Canada - some have
called it a crisis - solving itself? If you
believe vehicles are a commodity, and
subject to the pressures of supply and
demand, the answer might be yes.
Most automakers in underbuild situations
during the COVID-19 pandemic
were able to increase prices because
demand outpaced supply. The same
holds true for low-volume, high-demand
vehicles that have
tens of thousands
of dollars of " market
adjustment "
added to the sticker.
Like
fuel prices
that don't even
remotely correspond
to the cost of oil but
rather the lineups at
the pumps, when
demand drops, so
do prices.
Logically, then,
when automakers
get into an overbuild
situation -
demand is either
satisfied or falling
- prices adjust downward. It can be a
little or a lot, and that can happen with
cash incentives, reduced interest rates,
lower vehicle prices or a combination of
those tactics.
Just how high are prices, or payments?
Robert Karwel, the senior manager
of the Canadian automotive practice
at J.D. Power, said the average
payment for a pickup is $1,000 a
month. Now that dealership lots are filling
up - supply is greater than
demand - it's easy to make the argument
that prices and payments will
come down, especially when competition
between brands increases, or when
sales fall off when lots are full.
A case in point: Ram pickup sales
were down 24.3 per cent in the first
quarter of 2024 compared with the first
quarter of 2023, against a market that
was up 9.2 per cent. We know of Ram
dealerships, with full lots, offering discounts
of up to 30 per cent, depending
on the model.
Jeep sales were down 12.2 per cent
for the quarter. Is it coincidence that
we've seen Jeep Wrangler Unlimiteds
being offered for lease at 89 bucks a
EDITOR-IN-CHIEF
JEFF
MELNYCHUK
week plus tax and $2,500 down? No it
isn't. Dealers need to move metal
that's costing more to keep around,
thanks to high interest rates.
Most, not all, luxury brands were
down for the quarter. BMW Group, for
example, was down 11.0 per cent. I
don't have an indication that there are
any fire sales, but it stands to reason
that might happen. It's just a question
of where the tipping point is.
But the greatest downward price
pressure could be on electric vehicles,
in the face of widely published reports
of slackening demand. That will come
as a relief to people who say that price
stands in the way of adoption, which is
significant given the current federal government
zero-emission vehicle sales
mandates and those in place in British
Columbia and Quebec.
There have certainly been signs of
this with recent price cuts for Tesla
vehicles and the Ford Mustang Mach-E,
the latter of which, we're told by dealers,
is languishing on lots.
The latest drop - a big one -
arrived while I was writing this column:
Fisker has slashed the price of the
Ocean Extreme trim by a barely believable
$31,000, to $48,799 from
$79,799, including shipping. And now
it qualifies for government rebates
worth anywhere from $5,000 to
$12,000 depending on the province.
That's up to half off.
Would I buy a Fisker Ocean Extreme
for $37,000 to $44,000? Solvency
issues with the company and service
notwithstanding, I would definitely be
more inclined to dive in than at
$80,000.
It's important to point out that sales
are still strong, especially for most
mainstream nameplates. Sales of the
Honda Civic, for example, were up 94
per cent in March and 66 per cent for
the quarter, possibly eating into sales of
more expensive vehicles.
But for brands that are down, signs
indicate the affordability problem might
be solving itself. - ANC
[diversity, equity and inclusion] and a
lot of organizations did not exist
when I was first entering the workforce, "
said Miller, project lead,
workforce and talent strategy at the
provincial government's Ontario
Vehicle Innovation Network (OVIN).
" I'm quite optimistic about where
this can go. "
The auto
industry needs
to take bold
action to
accelerate
progress
toward
workplace
diversity.
Miller shared her outlook as one of four panelists
on Automotive News Canada's March 28 online
forum, Embracing Diversity, Black Canadians and
the Automotive Industry (coverage on Page 22).
Key to meaningful change is
reaching young people, said
Miller, citing campaigns such as
those launched by Accelerate
Auto, a nonprofit seeking to
boost Black representation in the
sector.
For the second consecutive
year, Accelerate Auto invited a
group of Black high school students
from the Toronto area to
the Canadian International
AutoShow in February.
" They had these very deep
questions that they were able to
ask about things like electrification,
and connect with [industry representatives] in
person, " said Miller. " I think that does make a difference
with changing perceptions about the sector
and what's possible. "
On the talent-development front, OVIN's Regional
WRITE TO US:
We invite letters from our readers for publication
(250-word max., please indicate " for publication " ).
We reserve the right to edit all submissions for length, content and clarity. Include your name,
title, company name, city and province, and tell us your connection to the auto industry.
Email letters to Grace.Macaluso@autonews.com
Auto sector is making DEI gains,
but more needs to be done
OVER THE LAST THREE YEARS, SHANNON MILLER
has seen " some progress " with the auto industry's
efforts to diversify its workforce.
" A lot of the programs and initiatives around DEI
Future Workforce Program has introduced " tens of
thousands of students " to the industry's career
opportunities in such areas as critical minerals, vehicle
sales and the aftermarket, she said.
MACALUSO
MANAGING EDITOR
GRACE
" I have high hopes in getting the
next generation of talent excited
about what it could mean to work in
automotive. "
Fellow panelist Smruti Patel
acknowledged that " there's more
work to be done, " but she sees
positive signs each time she meets
with clients or visits a dealership.
" I see more and more different people every
time I get a call or I walk into a store, " said Patel,
director of specialized lending at
RBC.
John Currado, president, taq
Automotive Intelligence, agreed.
" We're moving in the right direction, "
he said. " I've been to several
[industry] events over the last several
months, and the make-up of
those panels is changing. And
there's a focus.
" We're not done, but you can be
very excited about where it's going. "
The industry must continue to
forge ahead, said Keegan HenryMathieu,
senior retail account manager
at RBC.
" We have to continue challenging
ourselves, " he said. " We have
to continue to be bold if we want
this space and to make meaningful
change. Collectively we can make a
difference and close some of the gaps that existed
within the last decade. " - ANC
Miller:
Student
outreach
is bringing
results
as young
people
see the
potential for
automotive
careers.
PHOTO:
LINKEDIN
'Anticlimactic' first quarter results
make for a sales story as old as time
BEWARE THE IDES OF MARCH.
That about sums up my feelings
on quarterly sales of new light
vehicles.
During the first two months of
PUBLISHED MONTHLY BY CRAIN COMMUNICATIONS, INC.
KC CRAIN, GROUP PUBLISHER & CEO
JEFF MELNYCHUK, EDITOR-IN-CHIEF, 506.866.8236, Jeff.Melnychuk@autonews.com
GRACE MACALUSO, MANAGING EDITOR, 226.787.0441, Grace.Macaluso@autonews.com
GREG LAYSON, DIGITAL AND MOBILE EDITOR, 519.567.8877, Greg.Layson@autonews.com
DAVID KENNEDY, TORONTO BUREAU CHIEF, 416.712.1378, david.kennedy@autonews.com
EMMA HANCOCK, HOST AND CONTENT STRATEGIST, 647.921.3543, emma.hancock@autonews.com
TIM DIMOPOULOS, MANAGING DIRECTOR/PUBLISHER
416.560.7663, tim.dimopoulos@autonews.com
ADVERTISING SALES
MATT PARSONS, 313.446.5866, mparsons@autonews.com
CUSTOMER SERVICE/SUBSCRIPTIONS: 877.812.1257
customerservicecanada@autonews.com
CHRISSY TAYLOR, VICE-PRESIDENT EDITORIAL OPERATIONS, AUTOMOTIVE NEWS GROUP
KC CRAIN, PRESIDENT & CEO
KEITH E. CRAIN, EDITOR EMERITUS
Analysts
have been
saying for
years the
industry
would be
back in an
'overbuild
situation' by
the second
quarter of
2024. They
were right.
the year, the industry was heating
up, running away
on the path to
pre-pandemic
" normal. "
The seasonally
adjusted annual
rate of sales
- or SAAR -
was humming
along. In January,
it was 2.06 million,
crossing
over the two-million
mark for the
first time since
February 2020,
the last month
before the
COVID-19 pandemic
arrived. It
was even better
in February, when it hit 2.11 million.
Two-million-plus
in what are
traditionally two of the slowest
sales months of the year. Surely,
the industry was on a record
pace, right?
Wrong.
Because along came March. In
like a lion, hunting like a lion and
leaving like a lion, ripping retail's
hope to shreds.
DIGITAL AND
MOBILE EDITOR
GREG
LAYSON
Sure, March sales were up 9.2
per cent to 159,000 compared
with the same month a year ago.
But that total pales in comparison
to February's gain of 24.4 per
cent.
DesRosiers Automotive
Consultants (DAC) described the
total as " a touch anticlimactic. "
And what's worse, the SAAR
came in at an uninspiring 1.74
million.
But I should have seen this
coming.
Analysts from J.D. Power
Canada to the U.S.-based
AutoForecast Solutions have been
telling me for years - seriously,
since about late 2020 - that the
industry would be back in an
" overbuild situation " by the second
quarter of 2024.
And here it is. Inventory is
building. Take a drive by any
Detroit Three dealership lot and
count the number of pickups and
SUVs lined up row upon row.
Or just look at luxury sales,
something that had sustained
automakers and their dealers'
margins during the pandemic and
global microchip shortage, when
people were flush with cash, and
it was good business to focus
assembly on high-end vehicles.
But now the luxury market " is
showing distinct signs of weakness, "
DAC said.
Cadillac, BMW, Lexus, Infiniti,
Acura and Lincoln all saw their
sales plunge in the first quarter.
Look, I'll admit, I got bored
writing essentially the same sales
story for a year or more. It was
formulaic: Chip shortage continues.
Inventory scarce. Demand
high. Sales down. Rinse. Repeat.
So, I can't really complain
about the shift from starring in an
automotive version of the movie
" Groundhog Day " to being thrust
into the script of some roller-coaster
ride of a narrative.
But like I said, I should have
seen it coming. Because it's a
story as old as time: Beware the
Ides of March. - ANC
Take a drive by any Detroit
Three dealership lot and
count the number of pickups
and SUVs lined up row upon
row. FILE PHOTO

Automotive News Canada - April 2024

Table of Contents for the Digital Edition of Automotive News Canada - April 2024