Canadians are increasingly looking to cars as a safe way to get around in the wake of the COVID-19 pandemic, according to a new survey that offers a glimmer of hope to the ailing auto industry.
Even as vehicle sales crashed in April while many dealerships and factories were forced to close, a survey commissioned by AutoTrader.ca found the pandemic may push people to buy automobiles and away from other forms of transportation.
Among people who did not own a vehicle, 14 per cent said that they planned on purchasing one as a direct result of COVID-19. The survey also found that vehicle ownership has become slightly more desirable relative to using public transit and ride-sharing services.
A larger survey from market-research firm Ipsos found that in the U.S., among people who intended on buying a vehicle pre-COVID-19, one third were now more likely to buy, while only 20 per cent said a purchase was less likely. Across 11 countries in Europe, Asia, North and South America, the driving force for people more intent on buying a car was a desire to feel safer and more protected.
The increased desirability of car ownerships wasn’t only related to issues of health, the AutoTrader survey found. Only 33 per cent of people said “control over cleanliness and hygiene” was the top reason for the increased desirability of car ownership, while 44 per cent said it was the “flexibility to travel and commute,” and 36 per cent said it was the “personal space afforded in a car.”
As vehicles became more popular, other modes of transportation were less appealing, the survey found. Among people who previously used ride-sharing services such as Uber and Lyft, 70 per cent said they do not plan on using it after the pandemic. Similarly, 40 per cent of people who used public transit said they don’t plan on using it after COVID-19.
“Initial findings indicate that COVID-19 may have a significant impact in the way Canadians choose to travel moving forward,” the survey concluded. It was conducted in late March 2020 and included 1,000 respondents from across the country.
Auto sales may be bottoming out
Such consumer sentiment will come as a relief to the auto industry, which has been hit hard by COVID-19.
“April brought a further step into uncharted territory with light-vehicle sales falling 74.6 per cent from 2019 levels,” according to a note from market-research firm DesRosiers Automotive Consultants. Total sales were at their lowest level since 1951, when Canada’s population was just 14 million.
Industry analysts say the worst of the sales downturn may be in the rear-view mirror as politicians across Canada lay out plans to reopen the economy, some as early as the coming weeks.
“This could mean that April 2020 results brought us to the bottom of this chasm, and the first tentative steps of recovery can potentially start as early as next month,” said the note from DesRosiers.
In the U.S., auto sales have begun to show signs of a rebound over the last few weeks, said Robert Karwel, senior manager of automotive practice in Canada for J.D. Power.
“We’ve probably hit bottom in April,” Karwel said in an interview, even though Canadian sales had yet to see an uptick at the time. “May will be the month where we’re looking for some signs of life,” he added.
Demand for cars still there as prices remain high
Despite dire sales figures, the number of people in Canada who intend to purchase a new or used vehicle in the next six months has stabilized at 18 per cent, after dropping slightly from 23 per cent at the beginning of the pandemic, according to another survey by AutoTrader.ca.
Vehicle prices have roughly held steady even as sales plummeted in March and April. “The median retail price of a new vehicle across Canada in April 2020 has settled at $40,115, a marginal increase of 0.8 per cent year-over-year,” according to data provided to the Globe and Mail by AutoTrader. After a slight decline in March, the median retail price for new trucks rebounded up to $55,170 in April. Sedan prices fell slightly, while SUV prices remained flat over the same period.
If those prices seem relatively high, that’s because they are. In late 2019, the average selling price of a new vehicle in Canada crossed above the $40,000 mark for the first time, according to DesRosiers. The increase was largely driven by the fact more people are choosing trucks and SUVs, which are significantly more expensive than sedans and hatchbacks, the consultancy noted.
Vehicle sales continued the trend away from traditional cars. The relatively few people who were still buying vehicles last month were mostly buying trucks and, to a certain extent, SUVs, said J.D. Power’s Robert Karwel. There was a bigger drop in sales of sedans and minivans, which is in keeping with the ongoing popularity of SUVs, he noted.
Automakers have recently pulled back on some of the incentives and discounts on new vehicles, Karwel said. Part of that is seasonal, he explained, but automakers are also taking into account the fact their assembly plants have had to close due to COVID-19. “They’re thinking, ‘we can’t make cars, so you don’t exactly need a fire-sale to get rid of them,’” said Karwel.
It’s too early to give a timeline for when auto sales might fully recover, but pent-up demand could cause a spike in sales.
In Wuhan, the Chinese city that was the first COVID-19 epicentre, Bloomberg reported in early April that car sales had already bounced back to pre-crisis levels. Dealers were seeing families buying second cars because they see vehicles as safer than public transit. Ipsos also found that an increasing number of people in China who didn’t own a car wanted to buy one after COVID-19.
“We could have a mini-boom after this with so many people delaying vehicle purchase[s], if people are getting reemployed and the jobs are coming back,” Karwel said.
While that’s some much-needed good news for the auto industry, having more cars crowding streets and highways would be bad news for cities looking to reduce traffic congestion.
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