Buyers dig deep as auto production hits roadblock



Canadian stocks are down, prices are high and consumers are left with less attractive options

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With a limited supply of cars, George Epitropou says stocks at his six dealerships in the Greater Toronto Area have started to run out. This month, nearly a third of new vehicle orders go unfulfilled, he said, with supply problems set to worsen “again in August”.

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While many buyers are content with their second or third choice, depending on what is available in the sales field, the waiting list at each of the Epitropou dealerships, for Mazda, Hyundai and Kia, averages between ten and 20 people, he said.

“Everything sells,” he noted. “As soon as a (more expensive) topping is gone, all of a sudden, the demand goes to the next topping.” While lower versions are generally slower to sell, they are also currently in high demand, Epitropou added.

The discounts have halved because customers aren’t asking for them, he said, adding that “it’s about market scale right now.” “They don’t, or can’t, negotiate like they used to.”

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Right now, dealers may “not have to negotiate at all,” said Srini Rajagopalan, general manager, East Coast and Canada at JD Power. “People can afford these higher prices and there just aren’t enough vehicles. “

According to data from JD Power, industry incentive spending fell below $ 4,000 ($ 3,940) for the first time on record. In comparison, the average incentive spend per vehicle was $ 6,108 last May and $ 5,270 in May 2019.

While sales are said to have fallen by around 12% from 2019, the number of days a vehicle stays on the market has also fallen sharply, according to JD Power. The cars were in the field for around 56 days in May, a “drastic” reduction from 114 days in May 2020 and around 70 in May 2019, he found.

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A global shortage of microprocessors in recent months, combined with pent-up consumer demand, is forcing those looking to buy a car to look deeper or dig deeper.

One of his best deals for a used small SUV, like a one-year-old Mazda CX-3 GS with 20,000 km on the clock, would cost around $ 20,000 today, up from $ 17,000 in 2019, has declared Epitropou. Overall, the price of used cars is up 25% from a year ago and 15% from 2019, said James Hancock, director of business development for Canadian Black Book, a Canadian Black Book company. used car research.

In the United States, a study found that at least 16 popular used models sell for more than new ones. The Toyota Rav4 hybrid, for example, is sold used at US $ 36,352, or 3.9 percent more than new. According to the study, a new Tacoma sells for $ 37,902, while a used Tacoma costs $ 39,857, or 5.2% more. Meanwhile, a used Kia Telluride costs $ 47,730, or $ 3,564, or 8%, more than the new one.

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Dealers and experts said fewer cars were traded in due to lower depreciation and the lack of new cars available.

There are simply not enough vehicles

Used cars from Canada also generate higher profits in the United States, which further contributes to the shortfall. While the inventory of new cars in the United States has shrunk by 50%, used cars will cost 35-45% more this year, Hancock said.

According to data from the Canadian Black Book, the number of vehicles exported to the United States from Canada increased 4.3% to 309,505 from 2019 to 2020. By comparison, 151,952 vehicles were exported to the United States from January to May 2021 only.

Over the past two years, it has been more beneficial for sellers to export cars to the United States, said Nick Sgro, Nissan dealer and vice president of YNG Group, attributing it to conversion rates ” favorable ”and supply level“ cycles ”. He speculated that at present, a single car from Canada is priced the same as “wholesale rates” in the United States.

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A JD Power study earlier this year found that a number of Canadian vehicles end up being shipped to the United States, including 25 percent of all traditional pickups sold, 10 to 25 percent of small and mid-size popular cars and 15 percent SUVs and crossovers. .

As a result, Canadian stocks are down, prices are high, and consumers are left with less attractive options.

Brian Murphy, managing director of Cox Automotive, a used vehicle information company, said he suggested that buyers arrange a dealership purchase now if they want the car by “October or November”.

In today’s market, “consumers may have to spend more time researching to find the vehicle they want. And they may have to travel further to get it, ”he said.

It may take more than a year for supply to normalize and manufacturers to resolve the backlog, he added.

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