DEALERS REMAIN CAUTIOUS, BUT 2012 SALES ARE ROCK SOLID
Much has been made this year of the very strong rebound we’ve seen in Canada in the retail automotive market.
After a modest year of gains in 2011, most were predicting little more than a few percentage points of growth this year, given the context of slow growth and global uncertainty in which we find ourselves.
But — as of this writing — total new car sales for the first half of 2012 have been incredibly buoyant. Driven by continued record affordability and a commodity-price driven Canadian economy, new car sales were up 10.4 per cent in the first half of 2012. If this pace is sustained, it will be a banner year for new car sales in Canada, eclipsing 1.7 million new units for only the second time in our history.
Indeed, double-digit new vehicle sales growth is one of the brightest spots in an otherwise ho-hum economic story for the country as a whole. Growth is tepid; unemployment remains higher than what may be considered “normal”; worries abound about what’s going on in the rest of the world.
And yet Canadians snapped up new vehicles at a near-record pace from January until July of this year. By the time you read this it will be much clearer if this momentum can be sustained for the final two quarters of 2012. But even if sales do slow down and return closer to 2011 levels for the second half of the year, we’ll still be looking at very strong growth and an excellent year to be a new car dealer in Canada in 2012.
OFF AND RUNNING
In other words, it will take something especially negative in the second half of the year to come anywhere near reversing the gains that were made in the first half. Despite what’s going on around the world and the risks that we face domestically, it’s hard to imagine sales collapsing enough in late summer to slow the momentum we’ve seen build up now for many months.
Whatever happens in the short term for the rest of the year, this kind of sales growth is not likely to sustain itself over the longer term. Growth north of 10 per cent is not something we can expect to become the norm in this industry or any other mature ones in Canada.
Over the long term, new vehicle demand will tend to mimic the economy at large pretty tightly, dependent as it is upon the greater fundamentals of the economy that underpin growth in general. And most predictions see us growing at a modest rate for the next several years.
Still, pent up demand and lower-than-ever new vehicle prices are driving a huge recovery so far this year which in turn is helping boost overall retail sales, an important indicator that has otherwise struggled this year. It would have struggled even more if not for solid sales at new car dealerships — a sector that represents almost a fifth of all retail sales in the country.
So add it all up and it means that with each passing day and sales target we distance ourselves ever more from the recession in 2008 and 2009. Car dealers are a cautious breed. The experience of the past four years has taught people in all sectors of the economy that massive volatility is something to be depended on. And there remain many reasons for caution.
But so far in 2012 a resurgent new car dealer network is driving the greater retail economy in ways we’ve not seen in years. Here’s hoping it keeps up.
