“Spring selling season” may not live up to the usual expectations of Canadian auto dealers this year due to the pandemic, but there has been strong and consistent feedback from dealers that June is going well for them, according to Canadian Black Book.
In its latest weekly COVID-19 Auto Industry Update, CBB said some dealers have described the month as going “extremely” well while others are expecting it to be better than June 2019. “Hopefully this positivity continues for the remainder of 2020,” said CBB
On wholesale prices — as of June 19, CBB said they are continuing to see prices in Canada slip, now much more slowly than in recent weeks.
“Car segments for 2-8-year-old vehicles fell by 0.16%, the smallest decline we have seen in the last 12 weeks,” said CBB. “In the month of June, the average weekly adjustment in car values has been -0.45%, which makes this past week’s performance a significant shift.”
The truck/SUV/crossover segments declined by 0.30%, which is a smaller drop in percentage compared to the past eight weeks. On average and during that period, the truck segments have declined by 0.58%. These are weekly adjustments based on CBB’s June 23 report.
Given the current situation CBB is expecting its value index to drop in June, though less than April’s record decline of 3.
“There is still a week of June to come, however directionally over the whole month we still see a decline,” said CBB. “That said, the decline is lessening, and some select vehicle segments are in fact, going up in value.”
Wholesale prices are expected to continue to decrease until it reaches a total decline of 17% industry wide. (For more on what is impacting wholesale prices, read our previous CBB report coverage.)
Separately, it’s also worth noting that the new NAFTA agreement (known as the Canada-United States-Mexico Agreement or CUSMA in Canada) takes effect July 1. There are new rules to consider, as part of the updated agreement, that will determine if a vehicle can cross North American borders on a tariff-free basis.
“These rules around local country content become more severe over time, demanding more localized content, and imposing a myriad of rules around wages and precisely how the value of content will be determined,” said CBB. “What this will mean at the border crossing on a day-to-day basis for used cars remains unclear.”
The tax on most vehicles coming into the U.S. would be 2.5% — that is if the vehicle is not certified as compliant with CUSMA rules. If it is a pickup truck or two-seat cargo van, a 25% tariff (“chicken tax”) could apply. The only parties that can help avoid such a situation are the OEMs, and that may be doubtful, according to CBB. More clarity is expected to be provided on CUSMA rules.
“There is also the possibility that the three governments involved in the agreement may grant additional time before the rules are enforced, especially given that some of the details around USMCA were only provided in the first week of June,” said CBB.
