Auto purchases in Canada fell sharply in November: Scotiabank

Auto purchases in Canada fell sharply by 4.5% month-over-month (m/m) in November to just
under 1.9 million seasonally-adjusted units for the first time since October 2016, a new report from Scotiabank says.

According to Scotiabank’s latest Auto News Flash, vehicle purchases also posted their sharpest year-on-year drop since 2009 at 9.4% year-over-year (y/y) from last November when volumes totalled their third highest on record. “November’s decline marks a nine-month streak of negative y/y prints which follows from 2017’s annual sales record of 2.04 million units,” the report said. “Slowing employment growth and a continuation of the Bank of Canada’s rate-hiking cycle may be curbing sales from their record highs toward a new normal of between 1.9 million and 2.0 million units of annual sales.”

Each of the Detroit Three automakers saw steep declines in sales, Scotiabank said, with GM, Ford, and Fiat-Chrysler Automobiles (FCA) down by 18.3% y/y, 10.7% y/y, and 35.1% y/y, in that order. “Last month’s contraction in FCA auto deliveries was the automaker’s steepest in Canada since late 2008 and its sixth double-digit y/y decline so far in 2018, with sales at the Italo-American automaker down by 14.6% year-to-date (ytd) compared to a slight 0.5% decrease for all the remaining automakers,” the report said. “FCA’s performance in Canada stands in stark contrast to that in the U.S., where sales of FCA vehicles have risen by 8.1% y/y ytd. Canadian sales of FCA minivans have contracted by close to a third, while RAM truck purchases have fallen by 14% ytd, compared to increases of 9.5% y/y ytd and 4% y/y ytd for these same FCA segments in the U.S., respectively. As such, the FCA decline in Canada may reflect a decision by the automaker to withhold product from Canada and instead push for stronger sales in the U.S.”

In the U.S., meanwhile, vehicle sales fell by 1.2% m/m in November to 17.4 million seasonally-adjusted units sold, owing to steep declines in car purchases but remaining above 17 million units for the third consecutive month after a short-lived lull in sales in August and September. “At 0.7% y/y, last month marked the first year-on-year November contraction since 2009 during a month in which dealers typically offer significant incentives to clear their inventories to make way for next year’s models,” Scotiabank said. “With only one month to go in 2018, we forecast vehicles sales in the U.S. to match 2017’s total of 17.1 million units sold – compared to 2016’s record of 17.5 million purchases – although they look set to move on a slight downward trajectory with auto deliveries forecast at 16.8 million units in 2019 as rising interest rates limit households’ purchases.”

Car sales in the U.S. declined by 14% y/y compared to a 6.3% y/y increase in light truck sales, as households continue to ditch coupes, sedans, and station wagons in favour of CUVs and SUVs. Alongside GM’s notice last week that it will not allocate final vehicle assembly to three of its assembly plants in North America – one of them in Oshawa, Ontario – the automaker also announced its decision to discontinue sales of three of its passenger car models in the U.S. “This announcement mirrors a statement earlier this year by Ford that it will also reduce the number of car lines on offer in the U.S. and Fiat-Chrysler’s ongoing move to completely eliminate sedan sales in North America and China,” Scotiabank said.