What was supposed to be a year of rejuvenation for the Canadian Light Vehicle market has, instead, been marked by supply-side constraints that have dampened a previously anticipated sales boon. The global microchip shortage has manifested itself in the Canadian market through low inventory, high prices, lack of incentives and fewer options. These issues have wreaked havoc on the Light Vehicle market in what is, with any luck, the beginning of the end of the pandemic in the country. But while many aspects of life are returning to pre-pandemic norms, the Light Vehicle industry is certainly not among them.
In the third quarter of this year, 446,400 Light Vehicles were delivered – a fall of 12% from the same quarter last year and 15% down from Q3 2019. In September, the seasonally adjusted rate of sales (SAAR) declined to 1.62 million units, which (excluding the months of March-May 2020 and May 2021, when much of the country was under stringent containment measures) is the lowest SAAR since December 2013. The selling rate did pick up to 1.64 million units/year in October, but the recovery was marginal, at best. The time a vehicle spends on a dealership lot fell to 46 days, marking the eighth straight month of decline and a drop from 63 days in October 2020. Average transaction prices, meanwhile, approached C$42,000, up from approximately C$38,000 a year ago.
The disruptions impacted individual parts of the industry in different ways, with some OEMs and body types suffering more than others. The biggest loser was the Pickup segment, although, admittedly, the comparisons are high, following a decline in market share of 5.8 percentage points from Q3 2020 and 4.1 percentage points from Q3 2019. At the OEM level, the Big 3 suffered the largest falls in market share, led by Stellantis, whose share dropped by 2.9 percentage points year-on-year.
Indeed, Stellantis is set to take the biggest hit of all the major OEMs this year, with an estimated contraction in market share of 2 percentage points. Ford’s share should remain flat, while GM is projected to see nominal growth of 2% year-on-year. These weak performances could open the door for European and Asian automakers to expand their footprints in the Canadian market. Among them, Toyota Group is likely to be the biggest beneficiary, given that it has weathered the chip shortage and ensuing production cuts better than most.
We do not expect the market metrics to improve over the remainder of the year. Increasing transaction prices, in particular, threaten the recovery and risk tipping the scales as they could cause what is currently a supply-side issue to spill over into the demand side of the market, which would create a drag and further hamper the recovery.
This new reality has prompted us to cut our 2022 Light Vehicle forecast for the Canadian market, with growth now seen at just 3% for the year, with the recovery unlikely to fully materialise until 2023-2024.