Canadian Black Book has released its latest update on COVID-19 and the automotive industry — and this time, there is some good news mixed in with the less-than-ideal projections.
After a period of closure, Ontario and Quebec dealerships (outside the Greater Montreal area) have opened for sales and not just service. Greater Montreal area dealerships will be able to re-open their showrooms on May 18 (or May 19, due to the National Patriots’ Day).
“Those two provinces represent approximately 65% of new vehicle sales in Canada,” said Canadian Black Book. “In our business, everything stops and starts with auto retailers, and with the sales lights back on, this signals the start of a recovery for our industry.”
In other good news, Canadian Black Book said there are “consistent positive patterns” emerging across the country where the wholesale market is concerned. Sale rates at auctions are improving, with several auctions including just over 50% of vehicles in the lanes selling — up from 10% or less early on during the pandemic.
“That said, we still believe that buyers and sellers are not on the same page when it comes to pricing; however we do expect there will be more agreement in the market in the coming weeks regarding true prices, in this volatile market,” said Canadian Black Book.
The not-so-good news comes from Statistics Canada, which released its Labour Force Survey and revealed the unemployment rate rose 5.2 percentage points to 13.0% in April. It comes after an increase of 2.2 percentage points in March, and is considered to be significant. The April figure represents the second highest level of unemployment, with the highest observed being 13.1% in December 1982.
“After the COVID-19 crisis is resolved from a public health standpoint, the lingering effects will be the recession this virus will leave in its wake,” said Canadian Black Book. “With record high unemployment and rock bottom consumer confidence, there will be a pronounced temporary change in behaviour for vehicle consumers.”
DesRosiers Automotive Consultants revealed a 75% decline in Canadian new vehicle sales in April, which followed a 48% decline in March. However, the industry could slowly begin to rebuild in May if dealerships nationwide can operate without additional interruptions and restrictions.
Canadian Black Book’s March Used Vehicle Retention Index revealed its most significant decline ever — of 3.3% — up from -2.9% in January 2008 for the largest single month decline. However, a slow recovery in used car values is anticipated towards the end of the year.
On the vehicle front in April, compact cars were down 4.8% followed by sports cars (-4.3%), mid-size cars (-2.8%) and full-size cars (-2.5%). Compact crossover/SUV segments lost 2.3% of value on average.
“These declines are significant given that the average monthly variation is typically very small, often well below 0.3% for a given segment,” said Canadian Black Book.
