Vehicle sales roared ahead in the U.S. market in January, but went into reverse in Canada.
Pent-up demand for cars and trucks that has driven the average of vehicles in the United States to 11 years old helped boost sales to a seasonally adjusted annual rate of more than 15 million, senior executives said Friday.
That’s positive news for the Canadian economy because the recovery of U.S. sales from the depths of the recession is creating strong demand for the cars, crossovers and minivans cranked out by auto makers’ assembly plants in Ontario, many of which are running on overtime. The U.S. market is the destination for about 80 per cent of the vehicles that come off the assembly lines operated by the five manufacturers that build vehicles in Ontario.
“The biggest driver of this year’s story is going to be replacement [demand],” Ken Czubay, vice-president of U.S. marketing, sales and service for Ford Motor Co. said Friday. “When the fleet is 11 years old, you can imagine the fuel economy that they used to get on an 11-year-old vehicle. They are now getting significantly better fuel economy,” Mr. Czubay told analysts and reporters on a conference call.
Kurt McNeil, vice-president of U.S. sales operations for General Motors Co., pegged the January sales rate at 15.3 million, up about 14 per cent from January, 2012, and 50 per cent from January, 2010.
“This says to us that we continue to recover strongly from the recession despite the headwinds of higher taxes and lower government spending,” Mr. McNeil said on GM’s conference call.
Both Ford and GM reported double-digit increases as did Chrysler Group LLC, Honda Motor Co. Ltd. and Toyota Motor Corp.
In Canada, Asia and Europe-based auto makers took the brunt of the slide, offsetting gains by the Canadian units of each of the Detroit Three.
Some of the big winners of last year found their sales slumping in January. Among those were South Korean auto makers, Hyundai Auto Canada Corp. and Kia Canada Inc., the Germany-based luxury brands and most of the Japan-based auto makers.
Chrysler Canada Inc. grabbed first place in the market with a 3-per-cent sales gain. Ford Motor Co. of Canada Ltd. posted the biggest advance among the Detroit Three with an 8-per-cent jump. General Motors of Canada Ltd. chimed in with a 6 per cent increase.
Volkswagen Canada Inc. recorded its best January sales yet.
Some of the January slump can likely be attributed to the end-of-year sales races in December pulling sales ahead by a month, said industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc.
The decline “shows the power of how much pressure they’re under to meet certain sales targets or have the best-selling vehicle in this or that category,” Mr. DesRosiers said.
Consumer confidence fell in December, noted Toronto-Dominion Bank economist Dina Ignatovic said, and there’s usually a one-month delay until that affects actual spending, so that may have had an impact.
“Auto sales in Canada have been fairly strong though, so consumers could just be taking a breather,” Ms. Ignatovic said.
Despite the sluggish start in actual sales, the seasonally adjusted annual rate in Canada was about 1.7 million units last month, said Bank of Nova Scotia economist Carlos Gomes, who is forecasting annual sales of 1.69 million in 2013.
That would top the 1.675 million delivered in 2012, but fall short of the record 1.731 million level hit in 2002.