North Americans wanted new wheels last month and they bought them in record numbers in Canada and at levels not seen in the United States since 2007.
The Canadian market hit its best month on record in May – up 6 per cent from a year earlier, reaching sales of 195,571 vehicles and a seasonally adjusted annual rate (SAAR) of 1.86 million. The market is on pace to break the record of 1.73 million set last year.
The U.S. SAAR hit 16.5 million, which is the kind of number auto makers were putting up regularly in the 2000s before the price of gas shot above $4 (U.S.) a gallon and the credit crisis led to the Great Recession of 2008-09.
The difference from the pre-crisis years in the U.S. market is that auto makers are selling vehicles without having to slap heavy, profit-sapping incentives on them.
“This is the real thing,” said George Magliano, senior auto economist of consulting firm IHS. “This is going to be the real breakthrough month. It’s a sign that the economy is picking up.”
Emily Kolinski Morris, senior economist for the Americas for Ford Motor Co., noted that the nature of demand is changing even from the past few years.
“We are getting away from the sort of pent-up replacement demand … that is forced because of the vehicles aging and we are getting into a little bit more discretionary purchases on the part of consumers,”` Ms. Kolinski Morris said on a conference call with reporters and analysts.
Both she and Mr. Magliano attributed that to improving economic fundamentals, including a falling unemployment rate.
The Canadian market outperformed the U.S. market during the recession and after it, but Canadian industry analyst Dennis DesRosiers said he had been worried that May sales would fall short of those a year earlier.
The month of May can make or break a year because it is when deliveries hit their peak during the crucial spring selling season.
The market is on pace to break the record of 1.73 million set last year.
“We hold to our fundamental belief that the Canadian market bought light vehicles below its potential and indeed its need for upwards of a decade,” Mr. DesRosiers said in a note. That ongoing need should underpin sales that could reach as high as 1.8 million annually during the next few years, he said.
Several companies set individual records in the month.
Chrysler Canada Inc. rode an 8-per-cent jump to the best single month it has recorded in Canada.
All of Chrysler’s gains were on the truck side, where the Dodge Grand Caravan, the Ram pickup and Jeep Wrangler posted the company’s biggest gains.
Nissan Canada Inc. posted a 27-per-cent increase, which was a record result and the best percentage increase among the major companies.
Porsche Canada also posted its highest monthly sales total.
Ford Motor Co. of Canada Ltd. outduelled Chrysler by 256 vehicles to take top spot in the month. Chrysler stayed ahead of Ford in the year-to-date sales race.
General Motors of Canada Ltd. posted one of its strongest months of the year with a 12 per cent gain. Sales for its parent company, General Motors Co., rose 13 per cent in the U.S. market, which leads analysts to believe that buyers are not affected by the recall scandal that has dogged the auto maker since February.
Nonetheless, GM Canada began offering employee pricing to buyers of almost all vehicle lines Tuesday, a move that is likely to heighten an incentive battle being waged in Canada.