Canadian auto sales forecast increased to 2 million units in 2017
An improved Prairie Provinces outlook is powering new vehicle purchases by Canadian businesses to a 10-year high, a new report from Scotiabank says.
Canadian auto sales have exceeded expectations this year, a new report from Scotiabank says, as strengthening economic growth has led to a sharp rebound in purchases in the resource-rich Prairie Provinces, including a recovery in fleet volumes.
“Historically, rising profitability has always been associated with rising fleet purchases,” Scotiabank said in its latest Global Auto Report. “We have raised our 2017 Canadian sales forecast to 2 million units, up from 1.94 million, owing to a stronger-than-expected recovery on the Prairies. We expect the improving corporate profit outlook to lift Canadian fleet volumes to a decade-high of 385,000 units this year, thereby supporting our raised new vehicle sales projection for 2017.”
According to the Global Auto Report, the car and light truck sales acceleration on the Prairies this year includes an 18% year-over-year (y/y) surge in May – the largest increase in more than four years. “This represents a significant reversal from a 15% slump during the past two years, and is a much stronger rebound than we were originally expecting,” Scotiabank said. “In fact, the Prairies are the only region to post double-digit sales gains so far this year, enabling the region to account for 37% of the overall increase in Canadian new vehicle sales through May, more than double its historical share of the Canadian new vehicle market.”
An improving oil patch outlook has more than doubled the number of active drilling rigs in Alberta this year, Scotiabank continued, enabling Calgary to move to the forefront of growth among Canadian cities. “Job gains in Calgary accelerated to 3.5% y/y in May, the fastest job creation in two years and double the growth rate across all of Canada,” Scotiabank’s report said. “This represents an impressive reversal for a city that was still shedding jobs last October. In fact, Calgary has accounted for more than 70% of all job growth in Alberta this year, double its share of both the provincial and national labour markets.”
The rebound in the Calgary economy has lifted auto sales in the city 12% y/y through April and accounted for 40% of all car and light truck sales in Alberta this year, up from a low of only 32% during the final months of 2015. “A double-digit increase in capital spending by the oil patch in 2017 has also led to additional business purchases of new cars and light trucks,” the report said. “Fleet volumes at Calgary dealerships have surged 20% y/y through April, and accounted for nearly 70% of all new fleet activity across Alberta. In fact, the surge in Calgary’s fleet volumes represents half of the nationwide increase through the first four months of the year.”
Business purchases of car and light trucks are also rebounding in the rest of the province, helping Alberta to account for nearly 75% of the increase in business volumes across Canada. “This represents nearly five times the province’s share of overall Canadian fleet purchases in 2016,” Scotiabank said. “While Alberta is the key driver behind improved fleet volumes in Canada in 2017, sales to businesses have also picked up in several other provinces alongside a strengthening corporate profit outlook. In fact, corporate earnings surged nearly 30% y/y across Canada in the opening months of 2017, the best performance since the first half of 2010 when the global economy was in its first year of recovery.”