North America Sales

John Zekany, Americas Vehicle Forecast Analyst

08 June 2021

A tale of two markets

The Canadian and US Light Vehicle markets were hit hard by the COVID-19 pandemic last year, with declines of almost 20% year-on-year and roughly 15% year-on-year, respectively. Although both followed downward trajectories, the US market came out on top.

Both markets started this year on a high note; in the first quarter, Canada was up by around 15% year-on-year, and the US by more than 12% year-on-year. With that said, the more substantial increase in the Canadian market does not necessarily mean that it is recovering faster than the US market. In fact, the stronger growth comes from a low base effect in Q1 2020, when Canadian sales declined by approximately 19%, compared with a drop of nearly 13% in US sales. One explanation for this disparity is the contrasting pandemic-related lockdowns in each of the two countries. Canada had more stringent health restrictions, covering a larger swathe of the population when compared with the US. A greater number of rural areas, for example, were not fully shut down for significant periods, which left consumers in those locations free to purchase new vehicles.

In April, however, the US and Canadian market trajectories began diverging. COVID-19 cases in the US were down considerably from their peak levels, thanks to a faster vaccine rollout. Canadian cases, on the other hand, were on the rise because of a lack of vaccine supply and several, more contagious variants of the virus taking hold. As a result, many provinces put new health restrictions in place to stem the spread. And although these were not as stringent as those previously implemented, they still had a dampening effect of commercial activity. When combined with the dismally low inventory levels and record-high transaction prices, this led to a weaker market performance. The selling rate in Canada declined by almost 20% month-on-month but rose by 4% in the US as states relaxed restrictions and consumers began feeling more comfortable leaving their homes. In May, the disparity began to level out, with the selling rate down by more than 8% for each market, indicating that Canada is making progress in battling the virus.

According to Our World in Data, as of early June, the seven-day moving average of cases per million people has dropped by more than 94% from its peak in the US, versus a decline of just 80% in Canada. It is not all doom and gloom for Canada, however. Both countries are making solid progress in controlling the virus and while they should see a healthy rise in Light Vehicle sales this year, the US market is clearly pulling ahead.