Canadian light-vehicle sales rose a healthy 5.0% year on year during the first half of 2017. Passenger car sales posted a 2.0% y/y decline, while light commercial vehicle sales showed a 8.9% y/y increase. Pick-up trucks continue to perform well, with SUV sales up 6.6% y/y.
IHS Markit significance
- Significance: The Canadian light-vehicle (LV) market has displayed a strong first half, with sales up 5.0% year on year (y/y). Light truck sales continue to improve, while passenger car sales remain under pressure, as in many other mature markets.
- Implications: LV sales results in Canada in the year to date have been strong enough for IHS Markit to increase our full-year sales growth forecast to 2.7%, although sales are likely to cool during the second half of the year.
- Outlook: The behaviour of the market in Canada in the first half has shown a similar trend as in the corresponding period of 2016, although at a stronger pace. Canada's sales in 2016 started strongly in the first half, but cooled over the second half; with a strong first half in 2017, we are perhaps seeing a similar pattern this year. In first half 2017, the market is up by 5.0% y/y. LCV sales gained 8.9% y/y, while passenger-car sales declined 2.0% y/y, and sales totalled 1.04 million units. IHS Markit has revised our full-year 2017 forecast upwards and currently projects an increase of 2.7% to 1.98 million units.
The first half of 2017 has delivered a solid performance for the Canadian light-vehicle (LV) market, with sales up 5.0% year on year (y/y), improving on the results through the first quarter (see Canada: 7 April 2017: Canadian light-vehicle sales rise 4.6% y/y in Q1). This follows records set in 2015 and 2016. Similar to the behaviour seen so far in 2017, 2016 delivered a strong first half, and then sales cooled over the second half. The pressure on passenger car sales has also carried over into 2017, as these were down 2.0% y/y in the first half, while sales of light commercial vehicles (LCVs) increased 8.9% y/y. Canada is also a truck-heavy market, with the Ford F-Series easily the best-selling product.
As in many other markets, over the course of 2016, the sport utility vehicle (SUV) C-segment continued to gain on the C-car segment. The C-SUV segment's sales overtook those in the C-car segment in September 2016 and the C-SUV segment retained that lead through the first quarter of 2017. The C-SUV segment claimed a 19.5% market share in the first half, compared with 18.8% for the C-car segment. While the C-car segment is losing to the C-SUV segment, both Honda and Toyota have seen their C-car entries (the Civic and the Corolla respectively) outperform their C-SUV entries (the CR-V and the RAV4 respectively) during the first half. The C-car and C-SUV segments' combined share in early 2017 came in at 38.3%, a little less than that at the close of 2016, when it reached of 39.2%. In addition, gains in sales of B-SUVs, D-SUVs, and D-pick-ups also suggest that passenger car buyers are migrating to a variety of other segments.
The Canadian market, however, continues to be dominated by sales of vehicles in the D segment, rather than the C segment. Although aggregate D-segment sales have been volatile throughout the year, sales in the class were up nearly 7% in the first half of 2017 and accounted for a 45.4% market share. D-segment vehicle sales reached 465,560 units in the first half, while C-segment sales lagged at 425,823 units. The larger D-size class has also widened its lead over the C segment in recent times. In 2015, D-segment vehicles outsold C-segment vehicles by 25,000 units; in 2016, the D segment was ahead by more than 31,500 units. Over the first half of 2017, D-segment sales were ahead of C-segment sales by nearly 40,000 units. The success of the D segment is driven by demand for D-segment pick-ups ‒ the Ford F-150 is a top-selling vehicle in Canada as well as the United States, and the second-best-selling product over the first half is the Ram 1500 ‒ and demand for D-segment SUVs, which grew by 7.0% over the first half of 2017. The C and D segments accounted for 85.7% of Canada's first-half 2017 sales.
In terms of manufacturers, Ford overtook Fiat Chrysler Automobiles (FCA) for top-selling honours in 2016. Although FCA had the lead in the first quarter of 2017, Ford pulled ahead in the first half. In March, General Motors (GM) outsold its rivals, but the company typically comes in third, where it sits in the first half results, even though it pulled into second place in June's monthly results.
Along with holding the overall lead among manufacturers in 2016 and being ahead of FCA by nearly 8,000 units in the first half of 2017, Ford held the top-selling light-vehicle brand position in Canada in 2016 with the F-Series. With 78,417 units of the F-Series sold in Canada over the first six months of 2017, the pick-up truck has a margin of more than 30,000 units over the second-best-seller, the Ram 1500. Although the Honda Civic did reach the mark of second-best-selling vehicle in Canada in March, at the halfway mark in 2017, the model is in third place. There is also a significant gap between Ford's best- and second-best-selling products; the Escape sold 23,423 units in the first half, compared with the F-Series' 78,427 units. Ford's Focus, Fusion, and Edge are under pressure from sales declines. FCA's lead product continues to be the Ram 1500, sales of which were up 22.3% in the first half. While FCA is slowly weaning Canada off of the Dodge Caravan and the popularity of C-segment utility vehicles grows, the Caravan had the second-best sales volume for the automaker in June and in the first half, keeping the Jeep Cherokee in fourth place, behind the Ram 2500/3500. The Caravan is now expected to soldier on into 2018, although sales were down 19.4% over the first half of 2017. The Pacifica is off to a slow start in Canada, reaching only 3,350 units in the first half of 2017. Sales also slowed in June 2017 compared with May 2017. GM also sells more pick-ups than any other models, with the GMC Sierra ahead of the Chevrolet Silverado in Canada. The Cruze and Equinox held third and fourth positions in June and in the year to date (YTD), although those models have alternated their positions in terms of monthly results. A new Cruze was launched in mid-2016, while an Equinox replacement arrives in mid-2017. Over the first half, improvements in the Sierra's sales put it only 2 units behind the Honda Civic for third-best-selling vehicle in the YTD. Toyota held fourth position in the first half, with nearly 36,000 units between the Japanese automaker and third-placed GM. 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 the year. However, the Corolla was ahead of the RAV4 over the first six months of 2017, growing its lead to about 3,000 units over the RAV4. Honda found its way into the top five to start off 2017, holding down Hyundai, although it was unable to maintain that lead and, over the first half, Hyundai had a 4,300-unit lead over Honda. Hyundai's most popular models in Canada are the Elantra, Tucson, and Santa Fe Sport. While Honda's CR-V leads the C-segment SUV sales, the Civic is its top-selling vehicle in Canada, ahead of the CR-V by 13,347 units in the first half of 2017.
Outlook and implications
The behaviour of the market in Canada in the first half has shown a similar trend as in the corresponding period of 2016, although at a stronger pace. Canada's sales in 2016 started strongly in the first half, but cooled over the second half; with a strong first half in 2017, we are perhaps seeing a similar pattern this year. In first half 2017, the market is up by 5.0% y/y. LCV sales gained 8.9% y/y, while passenger-car sales declined 2.0% y/y, and sales totalled 1.04 million units. IHS Markit has revised our full-year 2017 forecast upwards and currently projects an increase of 2.7% to 1.98 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 LV market. In June 2017, the share of passenger car sales came in at 33.2%. Over the first half of 2017, passenger cars' market share fell to 33.3%, compared with 35.7% over the same period of 2016. Light-truck sales have posted robust growth across all sizes, with subcompact light trucks posting the strongest growth rates in 2016. New subcompact models have been successful in drawing share from both passenger car segments and light-truck segments. Luxury also remains a driver of market growth. Consumers are responding well to expanding OEM product line-ups, as manufacturers attempt to move down market in terms of vehicle size and price, as well as into light utilities. Diverging from mainstream segments, however, luxury sales are strong in both passenger cars and light trucks.
After strong growth across all light-truck sectors in 2016 and another year of gains for Canada's light-vehicle sales, IHS Markit forecasts a healthy market in 2017. Rather than slipping this year, the market is on pace for a fourth consecutive record year and eight years of sales gains. Through 2024, we anticipate registrations to hover between 1.96 million units and 1.92 million units. Although another record was set in 2016, the pace of growth slowed from 5.7% y/y in 2014. The first six months of 2017 are, however, showing solid 5.0% y/y growth. Over the course of the forecast, economic fundamentals will continue to drive consumers' return to the market. 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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