Canadian vehicle sales rose by 4.4 per cent year-on-year (y/y) in the first quarter of 2023, with recent strength in the labour market supporting demand, according to the Canadian Automotive Outlook: Charting a Gradual Recovery report released Tuesday by TD Economics.
The report said North American auto production is expected to rise by 9.3 per cent y/y in 2023 to 15.5 million units as supply chain issues recede and Inventory improvements are expected to help Canadian sales track higher in 2023 to 1.6 million units, although sales are expected to remain below pre-pandemic levels as economic headwinds weigh on demand.
“Light vehicle sales began 2023 on strong footing as inventory levels improved and labour market strength helped to partially offset higher sales prices and higher financing costs. While annual sales are expected to grow by 2.4 per cent this year relative to 2022 as production levels increase on the back of easing supply chains issues, the second half of the year is expected to see a notable slowdown as the economy cools. Next year we expect that sales will grow by 8.6 per cent y/y, bringing the level of sales to 1.7 million units. On aggregate, auto purchasing activity is expected to remain subdued relative to pre-pandemic levels for the foreseeable future, as production recovers gradually and demand is restrained by higher costs and financing rates,” said the report.
“Light vehicle sales rose modestly to begin 2023, with sales averaging 115k units per-month during the first quarter. This marks a 4.4 per cent increase relative to 2022 Q1, with light truck volumes up 6.7 per cent year-on-year (y/y) and car volumes down seven per cent y/y. The outperformance of light trucks matches the aggregate trend seen in North America, as the shift towards higher end vehicle production in recent years coupled with the pre-pandemic trend of consumer preferences provided support to light truck sales.
“Canadian demand for automobiles has remained robust despite the weight of higher rates and higher prices on consumers, as labour market tightness buttressed wage growth and kept pent-up demand solid. The accumulation of pent-up demand over the past three years, if measured against the pre-pandemic average annual level of sales, is roughly equal to half a year’s worth of sales. As auto manufacturers continue to recover from the supply chain issues seen in recent years, production is expected to increase in 2023, bringing some of the much-needed supply, particularly in the affordable vehicle segment of the market, back online. However economic headwinds are expected to restrain both production and demand in 2023 as the cumulative effects of monetary policy tightening slow the economy.
“For 2023 we expect that vehicle sales in Canada will grow by roughly 2.4 per cent y/y, rising to 1.6 million units. While this represents a modest improvement, sales volumes are expected to continue to lag the pre-pandemic level of roughly 2 million units. North American auto production is expected to increase by 8.6 per cent y/y this year, helping to alleviate supply shortages although a full return to pre-pandemic levels is expected to remain evasive until 2024.”
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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