Canadians are pumping the brakes when it comes to buying vehicles compared to last year, thanks to slowing employment growth, higher interest rates and rising fuel costs.
According to a Scotiabank Economics report released this week, vehicle sales in Canada fell 1.9 per cent during the month of October when compared to the same time last year. The slowdown marked the eighth consecutive month of year-over-year declines in vehicle sales.
Scotiabank economist Juan Manuel Herrera, who authored the report, said the decline is largely due to slowing employment growth seen across the country.
“You have employment growth slowing down in most provinces across the country, which is a big factor that affects auto sales, and then on top of that you have interest rates increasing, which is keeping some buyers at bay,” Herrera said in an interview.
“At the same time you have higher fuel costs… so between that and higher interest rates, it’s just increasing the cost of owning a car.”
Passenger car sales fell 9.4 per cent this year to 509,956, according to monthly sales data released by Desrosiers Automotive Consultants Inc., while sales of light trucks – which includes SUVs, vans and trucks – increased 2 per cent to more than 1.2 million. There were 161,100 vehicles sold in October, bringing the year-to-date total up to 1.73 million, down from 1.76 million the same time last year.
Ford Motor Co., which has sold the most vehicles in Canada so far this year, has seen sales decline 2.4 per cent year-to-date, with 260,632 vehicles sold. General Motors Co. also saw sales decrease by 1.6 per cent to 255,169 and Fiat Chrysler Automobiles NV (FCA) saw a sharp decline of 12.9 per cent to 200,600.
But vehicle sales haven’t decreased across the board. While consumer sales have been more sluggish, fleet sales have increased between 4.5 and 5 per cent year-to-date, which Herrera says “masks” the decline in retail. This could be due in part to changing sales strategies at some of the leading automakers.
“What may be happening is that the OEMs may be counterbalancing a weakness in retail sales by being more aggressive in their push in sales towards firms,” he said. “It’s acting in a way to offset the losses in retail sales.”
Still, while sales have decreased since last year, Herrera notes they are still strong. Last year’s sales shattered previous records, with 2.04 million vehicles sold, due in part to a drastic economic recovery in oil-producing provinces such as Alberta and Saskatchewan. Herrera forecasts that sales will still hit 2 million by the end of 2018.
“Last year saw a big rebound in economic growth in some of the oil-producing provinces. That’s a one-off factor that you’re not getting this year,” Herrera said. “When you scale that factor out, the market is still pretty strong.”