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Report On Business Alberta car dealers still on a roll despite drop in oil prices

Oil prices threaten to send Alberta’s economy into skid, but November vehicle sales were up 4.8 per cent.

Jason Franson/The Globe and Mail

The sharp drop in oil prices will soon bite into Alberta's economic growth, but it appears to be barely registering on the radar screen of the province's car buyers – at least so far.

Vehicle sales rose 4.8 per cent in Alberta last month, a better performance than year-to-date sales, which shows that sales strengthened last month despite the 12 per cent drop in oil prices in November.

"So much for lower oil prices cratering the new vehicle market in Canada's oil-rich provinces," industry analyst Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc. said Thursday.

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That cratering may yet happen, Mr. DesRosiers acknowledged, but the long-term trend in vehicle sales in Alberta for the past 25 years has been upward.

Alberta is the third-largest new vehicle market in the country and for the year as a whole its sales have trailed the national rise of 5.4 per cent. But in November, it outperformed the national market, which rose 3.6 per cent.

Nationally, previous oil crises such as the embargo of the mid-1970s and the Gulf War of the early 1990s caused sales to fall, Mr. DesRosiers noted.

"So it is very likely that the opposite is true when oil/energy prices move down rather than up," he said.

The conventional wisdom that falling oil prices will hurt vehicle sales has also hit shares of Edmonton-based AutoCanada Inc., a publicly traded dealership group that has 22 of its 48 stores in Alberta.

AutoCanada's shares were trading at close to $70 at the beginning of November, but have since plunged. They closed at $45.08 on Thursday.

That reaction seems overdone, RBC Dominion Securities Inc. analyst Steve Arthur said in a note to clients earlier this month.

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"Auto sales are tied more to employment levels and consumer confidence than they are to the price of crude," Mr. Arthur said. "These factors are obviously linked in Alberta, but we expect a) a lag effect and b) a number of offsetting factors where lower gasoline prices typically help increase auto sales."

There's also little evidence that the drop in gas prices that has accompanied the fall in the price of oil has dampened sales of hybrid or electric vehicles, although changes in the buying behaviour of consumers typically take much longer than one month.

Sales of the battery-powered Nissan Leaf, for example, more than tripled last month to 103 from 30 last year.

Deliveries of the Prius family of vehicles sold by Toyota Canada Inc. rose 21 per cent to 543 from 449, while sales of the mid-sized Camry hybrid jumped 39 per cent to 263 from 189.

Sales of the Chevrolet Volt plug-in hybrid fell 56 per cent to 58 from 133.

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