Supply-driven sales slump endures, but light on the horizon

DesRosiers has released the sales figures for April 2022, showing another 13.3% sales decrease  from April 2021. An estimated 140,785 units were sold in April 2022, down from 162,455 in April 2021.

Monthly provincial performance was mixed, says the report, with “Ontario noting a decrease of ‘just’ 3.3%, while Newfoundland saw sales plummet with a 34.2% sales crash.” Besides Ontario, Saskatchewan also performed well relative to the market, down 8.8%. So far this year, provincial performances have generally been more in line with each other, though Ontario is still doing the best with an 8.8% sales decrease, while Nova Scotia is down 22.4%.

“Ontario has been outperforming Canada so far in 2022” commented Andrew King, Managing Partner of DAC. “Though supply side constraints make the usual economic rationale questionable, with the market performance and outlook dominated by vehicle shortages and supply chain issues.”

Speaking about the American market, which usually mirrors our own, the forecast is not all gloom. In a just-released study by TrueCar, there seems to be a glimmer of light at the end of the tunnel.

“This month we’re continuing to see a struggle for supply among the industry, however we’re also now starting to see signs of demand adjusting,” said Nick Woolard, Lead Industry Analyst at TrueCar. “Higher interest rates combined with higher fuel prices present a headwind to demand cooling off, which may explain why average used list prices are decreasing, down 1.6% in May versus April 2022. This trend is led by the used full-size vehicle segment.”

The ZeroSum Market First Report notes that this May, businesses are feeling the impact of lower consumer demand, factory shutdowns, and higher production costs, but, “as new vehicle inventory remains constant, and prices for both new and used cars begin to level off, dealers are continuing to benefit from high levels of profit.”

However, the report says, as a used car now costs almost as much as a new car did a year ago, consumers have finally hit the limit on what they are willing to pay. For dealers, this is a critical tipping point because they will need to accelerate turn rates on both new and used inventory to maintain profits and earn more inventory to sell.

The report gives these recommendations to dealers:

  1. Adjust your business model. Stabilization of new car inventory levels being the new normal, dealers will need to focus on used car marketing alongside new car marketing for business growth.
  2. Keep an eye on stabilizing prices. Be prepared to adjust your marketing as prices level off and consumer demand wanes. To maintain profit, the market pricing will have to be more strategic to meet demand.
  3. Be prepared for EV demand. Higher gas prices and long ordering waits are pushing consumers to purchase used electric vehicles at high prices.
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