Canada had a record year for vehicle sales in 2010 and entry-level sales boomed. Unfortunately, sales of new vehicles were pretty tepid.
Huh? What’s going on here? According to DesRosiers Automotive Consultants, Canadians bought a record 4.44 million vehicles in 2010. Overall, vehicle sales in Canada were up 4.6 per cent over 2009.
But dig deeper into the numbers and here’s what you find: Canadians really had a thing for buying used vehicles – at a rate of almost two used for every one new. DesRosiers’ research also shows that about one in five Canadians buys a new ride each year, every year, and have done so for a long time.
The thing is, “new-vehicle sales were up 6.6 per cent to 1.557 million units (in 2010), while used-vehicle sales were up 3.6 per cent to 2.89 million units,” notes DesRosiers in a note to clients. “There is however a slow but sure move to more used product. In the year 2000 used represented 56.6 per cent of the market and now represents 65 per cent of the market.”
We’re buying, but we’re buying a different mix of vehicles – and not just new versus used. Analyst Dennis DesRosiers is convinced that many entry-level buyers bought used cars last year, shying away from stalwarts of the Canadian new-car market such as the Honda Civic (sales down 8.2 per cent on the year) and Toyota Corolla (sales down 28.3 per cent on the year).
Why? Entry-level buyers have been hit hard by the economic downturn dating back to 2008. These buyers are shying away from locking in a new-car payment, unsure of the financial future. Instead, they’re buying used.
The truth is, passenger car sales in Canada last year were down 5.1 per cent; and sales of entry-level compacts and subcompacts were down 4.6 per cent and 15.8 per cent, respectively. Meanwhile, light truck sales boomed. Canadians snapped up pickups, SUVs, minivans and crossover wagons at a furious rate, with overall sales up 18.9 per cent.
“The truck market? They were giving them away,” says DesRosiers, referring to the generous incentives auto makers used to keep the big metal moving.
“Canadians aren’t stupid; with those kinds of incentives, Canadians said, ‘I’ll buy,’ “ he added, pointing to pickup truck incentives worth nearly $20,000 a vehicle in some cases and at least $12,000-$15,000 in most instances.
No wonder the Ford F-Series pickup truck was the best-selling vehicle in Canada last year with 97,913 units.
“With one exception [the Toyota RAV4 down 11.5 per cent], all the top 10 selling light trucks had quite spectacular years in 2010,” writes DesRosiers. “All were up at least double-digit from 2009 and some models were up in the high !!! double-digit range. The Dodge Ram was up 74.3 per cent and the Dodge Journey was up 54.5 per cent.
On the other hand, the Civic slumped, along with the Corolla, the Hyundai Accent (down 4.8 per cent) and the Toyota Matrix (down 15.2 per cent). Absolutely, the Civic finished the year as Canada’s best-selling passenger car for the 13th year in a row (1998-2010), but only because sales were juiced with significant incentives by the end of 2010.
“A 13-year streak is impressive for the Civic, although for the first time in a long time [Honda and its Civic] were threatened for the top position in 2010 with the Mazda3 neck-and-neck at least through the first nine months of the year. Strong sales in October and November for the Civic kept them in the top position,” according to DesRosiers.
The Civic, of course, struggled for more than one reason. The current model had been slated to be replaced by an all-new version last year. For various reasons, including cost-cutting, Honda chose to extend the life of the current car for about another year. An all-new Civic range arrives in the spring. The aging Civic had less appeal on its own merits in 2010, in other words.
And even though Honda Canada significantly turned to incentives later in 2010, for much of the year the company was reluctant to pile on sales sweeteners. Executive vice-president Jerry Chenkin points out that Honda actually put more sales incentive money on the Civic in 2009 than in 2010. The sales numbers show it.
