Canadian auto sales showed a healthy pace over the first half of 2017, with a gain of 5.0% for the light-vehicle market. Passenger cars posted a 2.0% decline, while LCVs showed a 8.9% increase. Pick-up trucks continue to perform well, with SUV segments up 6.6% y/y.
IHS Markit perspective
- Significance: The Canadian market has displayed a strong year through the third quarter, with sales up 5.5% y/y. Light truck sales continue to improve, while passenger cars remain under pressure, not unlike many other global mature markets
- Implications: Results to date in 2017 have been strong enough to push an increase in the IHS Markit full-year sales forecast to 4.5% full-year growth. Although sales cooled the second half of 2016, sales remained strong in the third quarter.
- Outlook: The market behaviour in Canada may lead to a stronger gain than in 2016. In 2017, demand has remained strong through the first three quarters and the market is on pace for a fourth consecutive record year and an eighth year of sales gains. Through September, the market was up by 5.5% y/y. LCV sales gained 9.4% y/y, while passenger-car sales declined 1.6% y/y, and sales totalled 1.59 million units over the first nine months of 2017. IHS Markit has revised its full-year forecast upward, and projects an increase of 4.5% to 2.01 million units.
Canadian light-vehicle sales continue to be a positive sector in 2017, with improvement in each of the first three quarters. Over the first quarter, sales had increased by 4.6%, at the halfway mark, sales were up 5.0%. At the end of the third quarter, sales have increased 5.5% (see Canada: 12 July 2017: Strong light-vehicle sale in H1 set Canada on track for another record year and Canada: 7 April 2017: Canadian light-vehicle sales rise 4.6% y/y in Q1). This follows records set in 2015 and 2016. While in 2016, a strong first half was followed by cooling over the second half, in 2017 the pace has remained healthy. The pressure on passenger cars also carries into 2017, as passenger car sales are down 1.6% y/y, while sales of light commercial vehicles (LCVs) are up 9.4% y/y. Canada is also a truck-heavy market, with the Ford F-Series easily the best-selling product, followed by second-place Ram 1500 pick-up truck.
As in many other markets, over the course of 2016, the C-SUV segment continued to gain on the C-car segment. The C-SUV segment overtook C-cars in September 2016 and has only expanded that lead. C-SUVs claimed 20.4% market share in the year to date (YTD), up from 19.5% at the halfway point and compared with 18.7% for the C-car segment in the YTD. Although C-car is losing to the C-SUV segment, both Honda and Toyota's C-car entries (the Civic and Corolla) have outperformed their C-SUV entries (CR-V and RAV4) through September 2017. The RAV4 is the best-selling C-SUV in Canada as well. Gains in sales of B-SUVs (up 10.2%), D-SUVs (up 7.4%), and D-pick-ups (up 14.6%) also suggest that passenger car buyers are migrating to a variety of segments.
The Canadian market, however, continues to be dominated by sales of vehicles in the D segment, rather than the C segment. D-segment aggregate sales outpace aggregate C-segment sales, but tend to be volatile. In September 2017, D-segment sales were up 8.4%, accounting for 43.7% of the market's overall sales. In January to September, D-segment sales were up 7.0% y/y. Pick-up sales easily represent the largest proportion of the D-segment, with a 19.5% market share in the first nine months of 2017. Of note, both the more popular C-car and C-SUV segments offer myriad product options, while the D-pick-up segment offers only four choices. The Ford F-150 is the segment leader and the best-selling vehicle in Canada.
Looking at manufacturers' performances, Ford leads in the YTD, followed by General Motors (GM), Fiat Chrysler Automobiles (FCA), Toyota and Hyundai. FCA fell behind GM into third place in July; results since have widened the gap. Although GM's sales grew 7.0% in September, FCA dropped 6.0%. In the YTD, FCA is down 2.1%. In August, GM outsold Ford as well, but was unable to repeat that in September. The interplay between manufacturers reflects a competitive industry. Ford and FCA have battled for the title of top automaker in Canada for several years and the often swap places as top-selling sales parent in monthly results, but FCA is seeing more decline in 2017. Ford held the crown as the top seller in the full-year 2014, but with the close of 2015, FCA took back the lead. In 2016, Ford pulled ahead of FCA by about 26,000 units. FCA's 2017 performance to date indicates it will be fighting for second position.
Ford continues to hold the top-selling light-vehicle nameplate in Canada, with the F-Series easily securing the top position month after month. Over the first nine months of 2017, Ford's truck has stretched its lead to more than 55,000 units ahead of the second-placed Ram 1500. There is also a significant gap between Ford's best- and second-best-selling products: the Escape has sold only 37,177 units in the YTD, compared with the F-Series' 123,036 units. GM also sells more pick-ups than any other models, with the GMC Sierra ahead of the Chevrolet Silverado in Canada on a year to date basis, though the Silverado outsold Sierra in September 2017. The Cruze and Equinox held third and fourth positions in September 2017 and in the YTD. However, the highest-volume Equinox plant has been on strike for about two weeks, with the two sides not appearing to come together. Later in the year, the Equinox may lose ground on lack of supply. A new Cruze was launched in mid-2016, while an Equinox replacement arrived in mid-2017. FCA's lead product continued to be the Ram 1500, which was up 17.8% in the YTD. While FCA is slowly weaning Canada off of the Dodge Caravan and the popularity of C-segment utility vehicles grows, the Caravan holds the second-best volume for the automaker in September and in the YTD. In the YTD, the minivan's sales were down 9.2%. The popularity of C-SUVs has enabled the Jeep Cherokee to rise to third place in FCA's Canadian sales, despite a 25.7% YTD decline. The Caravan is now expected to soldier on until 2018. The Pacifica is off to a slow start in Canada, reaching only 4,649 units so far in 2017. Toyota holds fourth position, behind FCA by about 39,000 units through September. By November 2016, sales of Toyota's RAV4 eclipsed the Corolla's sales in the YTD to be the company's best-selling Canadian model for in 2016. However, the Corolla is ahead of the RAV4 over the first nine months of 2017, though its lead is slipping. September sales saw the RAV4 ahead of the Corolla by 829 units. Honda found its way into the top five to start off 2017, holding down Hyundai, though it was unable to maintain the position. In the YTD, Hyundai has stretched its lead to 8,700 units. Hyundai's most popular models in Canada are the Elantra, Tucson and Santa Fe Sport, with the Kia Sorento showing improvement as well. While Honda's CR-V leads the C-segment SUV sales in the YTD, the Civic is Honda's top-selling vehicle in Canada.
Outlook and implications
The market behaviour in Canada may lead to a stronger gain than in 2016. In 2017, demand has remained strong during the first three quarters and the market is on pace for a fourth consecutive record year and an eighth year of sales gains. Through September, the market up by 5.5% y/y. LCV sales gained 9.4% y/y, while passenger-car sales declined 1.6% y/y, and sales totalled 1.59 million units over the first nine months of 2017. IHS Markit has revised its full-year forecast upward, and projects an increase of 4.5% to 2.01 million units.
As in many other markets, passenger-car sales are struggling in the face of stable fuel prices and increased competition from a more diversified light truck market, especially the expanded market for subcompact and compact crossovers. In 2016, passenger cars captured only 34.9% of the market. In September 2017, the share of passenger car sales came in at 31.8%; in the YTD, passenger cars secured 32.9% of the market. Over the first half of 2017, passenger car market share has fallen to 33.3%, compared with 35.3% over the same period of 2016. Luxury continues to be a driver of market growth as registrations have been driven by an expanding OEM product portfolio. Following a 13.4% surge in 2015, overall luxury sales were up a solid 5.4% in 2016, and we expect premium sales to continue to outpace the overall market growth through the forecast horizon.
Through 2024, IHS Markit anticipates registrations to hover between 1.96 million units and 1.92 million units. Although consumer optimism related to personal finances and job security declined slightly throughout the first quarter of 2017, the boost in spending continues to materialise. Supported by a hot housing market and solid employment gains, the Canadian consumers have sustained higher levels of household debt and continue their spending spree, including purchases of new automobiles. Given the risks associated with household indebtedness, this robust activity will likely not last too long even though wages are rising because higher interest rates will likely add weight, increasing debt burdens and consuming a greater share of household budgets. Over the course of the forecast, IHS Markit forecasts Canadian market light vehicles sales will fluctuate between 1.99 and 1.95 million units through 2024. Eventually, traditional replacement demand will become the principal driver of the market, replacing the credit-fuelled growth driven by the accommodative policies coming from the Bank of Canada. Given that Canada is already a mature market, expansion will continue to slow as population trends and wage growth limit market potential.
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