Slowing sales tell only part of the story. Population growth and other changes could fuel more growth.
Those who have been in the automotive industry for any length of time know that the industry is a cyclical one and all that we can hope for after the top of the cycle has been reached is that the amplitude down to the valley of the cycle will not be large.
In 2018 overall sales were down either 2.6 per cent or 1.9 per cent depending on whose numbers you look at and that downward trend has continued for the first two months of the year.
The industry’s resource, DesRosiers Automotive Consultants — with which Global Automakers of Canada has a contract to aggregate the industry sales statistics and disseminate the overall sales statistics in a variety of reports — has noted that overall sales for 2018 in Canada were 1,984,992 down 2.6 per cent from 2017’s record total of 2,038,798.
However, if you looked at the sales figures reported by some industry media at the beginning of January you would have seen overall sales for 2018 reported as 2,003,506 or down only 1.9 per cent from last year’s sales record.
The question many may have is “Why are the numbers so different?”
The answer to that question lies mainly with the fact some estimate Tesla sales based on registration data — as Tesla does not report its sales to any jurisdiction in the world (that I am aware of.)
In the past, it may not have mattered if Tesla sales were included or not because they only were selling a few thousand units a year.
However, in 2018, some media estimated that Tesla sold 17,510 units in Canada, up from 3,600 the previous year. Okay. So what, you say? Well, the difference with respect to whether Tesla is included or not amounted to Canada having its second year of sales over the two-million mark ever — or not.
The reporting of sales matters. It matters especially in a declining market so that not only the industry but also economists who use vehicle sales as economic indicators have an accurate bearing on the state of the situation.
For Tesla, 17,500 sales is not insignificant. It is not insignificant for any manufacturer. Tesla had more sales than Bentley, Fiat, Genesis, Lamborghini, Maserati, McLaren, and Porsche — combined. Tesla sold more vehicles than each of Volvo, Jaguar Land Rover, Infiniti, Mini and Chrysler.
As public policy, vehicle availability, battery performance and consumer choice move the market closer — slowly but surely — towards electrified powertrains, it is clear that Tesla’s sales numbers will only continue to grow.
Becoming a more mainstream automaker also brings with that transition not only privileges but also responsibilities — such as the accurate reporting of sales each month.
I understand that this is an issue for Tesla in all markets — not just Canada, and perhaps there is some sensitivity around the reporting of sales and production numbers if the actual numbers end up bearing little resemblance to those forecast by the company or its leadership. That said, surely corporate transparency demands Tesla start reporting its monthly sales results.
Likewise, it seems inevitable that there may well be a number of new entrants into the automotive industry which, like Tesla, are selling only electric vehicles before too long. These companies should also make commitments before coming into the market that they will report their monthly sales results.
I started this article talking about the nature of the industry being cyclical which a review of the sales and production history of Canada or the United States would bear witness to. Yet there are many in the automotive industry today in Canada that have known nothing but annual sales records being set year after year in the industry for the last decade.
The question on everyone’s mind as we move further into 2019 and get ready to complete the first quarter, is how big will the sales drop be from 2018?
2018’s numbers were better than respectable, and no one will complain if the market stayed in and around the 1.8 – 1.9 million unit market. I wonder if we will look back at 2017’s record year of sales as not only the peak of the cycle, but the peak of auto sales period?
With the Uber-fication of transportation there may well be less need for younger, single, or older people to own a vehicle if they can get virtually anywhere they want to go using Uber or Lyft and if they do need a vehicle to head out on a longer trip, it is easy enough to rent one.
In urban centres at least, the younger generations often need to make a choice between owning transportation or being able to afford accommodation. You need somewhere to live more than you need a car.
Maybe, however, we are being too hasty in pronouncing 2017 as “peak auto”.
After all, our population continues to grow and, according to Dennis DesRosiers, the vehicle ownership as a percentage of the driving age population has increased from just over 70 per cent in 2000 to 87 per cent in 2017, which translates into an extra 9.6 million more vehicles on the road today than there were in the year 2000. That’s a lot of vehicles — roughly about one third of all of the vehicles on the road.
In the same research, DesRosiers points out that not only are the number of people in the youngest cohort of licensed drivers increasing — but also the number of older licensed drivers has increased at more than twice the rate of younger drivers.
It has been pointed out, however, that just because you have a driver’s license, it does not necessarily translate into owning a vehicle — but there is a better chance of it.
Thus, while single young urbanites may eschew owning vehicles when they are on their own, as soon as they partner up and start having families it is no longer easy and convenient to pack all of the stuff necessary for a baby quickly into an Uber car or public transit.
Therefore, there will continue to be a demand for vehicles as long as people continue having children.
Likewise, as long as the boomer co-hort continue to drive — the generation for whom driving was a right of passage and represented the ultimate freedom there will likely be continued demand from that segment of the population for vehicles. Particularly because the boomers are amongst the wealthiest cohorts and are perhaps more likely to continue their habits of buying a new, and likely a more expensive vehicle every three to four years.
However, the world is changing rapidly and disruption in the automotive industry is constant. 2017 may not go down in history as the year of peak auto sales but that day is coming and likely sooner than the industry thinks.
Therefore, these initiatives that we’ve seen automakers undertake to diversify their operations into being more oriented towards the provision of mobility services as opposed to necessarily manufacturing vehicles would seem to be a prescient view of the future of transportation.
