Just as it did for nearly every facet of the global economy, the pandemic plunged Canada’s new car market into upheaval, throwing supply and demand completely out of whack.
Factory shutdowns due to COVID-19 made for widespread shortages of parts, filtering down to a historic lack of finished vehicles for sale on dealer lots. And on the demand side, consumers were far less eager to buy what was available, as the economic uncertainty had them holding on to their existing cars far longer than usual.
Three years later, most of the weak links in the supply chain have been fixed, and customers are finally in the mood to buy a new set of wheels again, only to face a new conundrum: prices are higher than they’ve ever been — and that’s if you can even find a car for sale.
Jennifer Nemeth knows this first hand. She was in the market for her dream car, a plug-in Toyota Rav4 Prime, but says she was shocked when her local dealer told her how long she should expect to wait for one.
Jennifer Nemeth, pictured in Edmonton on June 5, went to a different automaker when she was told there would be an eight-year wait for her preferred new car. (Anis Heydari/CBC)
“‘It’s an eight-year wait,’ he said,” the Edmonton resident told CBC News in an interview. “They literally laughed at us.”
She eventually settled on putting down a deposit for a non plug-in hybrid version of the same car, but was told it, too, would likely be a year away.
She and her husband patiently waited for more than 11 months with next-to-no news from their dealer, before deciding last month to poke their head into their local Mitsubishi dealership and ask about a hybrid Outlander, another model that had initially caught their eye.
She thought the best-case scenario was that the Mitsubishi wait list was shorter than the Toyota one she was already on, but was amazed to discover the dealer had several models she could take home that day. “I’m thrilled that we actually got one,” she said. “We did not think we would have a vehicle to drive away in — that wasn’t even on our minds because nobody has any.”
Industry wide, that’s been the case. Data from DesRosiers Automotive Consultants shows that in the first quarter of 2023, on average, Canadian new car dealerships only had about 42 per cent of the inventory that they would have had before the pandemic. That’s better than the 19 per cent they were at the same time a year earlier, but still less than half of what could be considered normal.
Huw Williams, head of public affairs for the Canadian Automobile Dealers Association (CADA) says that while things are closer to normal than they’ve been in a while, there are still large gaps in the chain — and they’re often company-specific.
“There are auto makers who — for whatever reason, it’s not even always clear to us — are doing a better job of managing their supply chain,” he said. “But every dealer in the country wants more cars but can’t get them.”
Advice from an auto expert
Shari Prymak, of Car Help Canada, offers tips for consumers looking to buy a car amid vehicle shortages and inflated prices.
Prices are sky high
In the uneasy equilibrium between supply and demand, suppliers have the upper hand right now, which is a recipe for higher prices, says Rebekah Young, an economist with Scotiabank who covers the auto industry closely.
According to Young, the average price of a Canadian passenger vehicle is just over $45,000 right now. That figure is up by 30 per cent since 2019, “but it would be misleading to suggest that all car prices skyrocketed in the pandemic,” she said in an interview.
“A big part it was auto makers dedicating their limited supply of components into their most profitable vehicles.”
Economist Rebekah Young with Scotiabank, pictured on Monday, says the cost of building a new vehicle has risen by a lot in recent years. (Patrick Callaghan/CBC)
Semiconductors were in acutely short supply for much of 2020 and 2021, Young says, a situation that impacted the availability of everything from iPhones to fridges and cars.
Instead of cheaper entry level sedans with low margins, auto makers focused on using their limited resources to crank out big, expensive vehicles that are the most profitable to them. While Young says the semiconductor shortage is getting better, it’s still not over, and in the interim, the price of everything from copper and aluminum to rubber, steel and labour is sharply higher than it used to be.
“Energy and material prices are flat now but way up since 2019,” she said. “Friendshoring and rejigging supply chains cost them. If you look at [all these factors] you see the legitimacy of why a car should cost more now.”
Consumers like Nemeth may be happy to buy whatever their local dealer has, but the same can’t be said of that excuse.
“I understand that prices go up and I understand that COVID affected things,” she said. “I believe some of it but I think the dealerships are driving up rates and enjoying it because they can charge whatever they want — they say this is how much it is, and you say ‘yes please’ and wonder if you’re going to get kicked again.”
Situation with EVs even worse
The industry-wide pivot toward electric vehicles isn’t helping bring down high car prices, either. Charles Bernard, an economist with CADA, says anything electric is selling at an especially eye-watering premium.
They’re “more expensive and more complicated to make,” he said. “They need certain materials, certain parts and technological components that weren’t part of the old vehicles.”
Dealers can also charge basically whatever they want for EVs, he said, because consumer demand is there, even if you ask them to wait. “If you ask for a vehicle that is a combustion engine, usually the wait lists are way shorter,” Bernard said.
Charles Bernard, an economist with the Canadian Automobile Dealers Association, says that wait times and sticker prices are especially bad for any type of electric vehicle. He’s pictured on Monday. (Felix Desroches/CBC)
Nemeth says the floor model of the plug-in Toyota she initially wanted not only was on its way to someone else, it also cost $27,000 more than advertised. Even getting on the list for the non-plug version required a refundable $5,000 deposit above and beyond the sale price.
“It’s because they can,” she said “If the demand is there they can ask whatever they want.”
Young at Scotiabank says she expects supply and demand to come more into balance later this year and into next, but that doesn’t mean prices are going to go back to what they were before.
“Hopefully as we get into 2024, we start to see more normal behaviours in the economy … But I would still say we’re not likely to see prices drop substantially,” she said. “Even if the cost of a new vehicle increases by zero per cent next year, that sticker price is still high for the average Canadian household.”
MONTREAL – Travel company Transat AT Inc. reported a loss in its latest quarter compared with a profit a year earlier as its revenue edged lower.
The parent company of Air Transat says it lost $39.9 million or $1.03 per diluted share in its quarter ended July 31.
The result compared with a profit of $57.3 million or $1.49 per diluted share a year earlier.
Revenue in what was the company’s third quarter totalled $736.2 million, down from $746.3 million in the same quarter last year.
On an adjusted basis, Transat says it lost $1.10 per share in its latest quarter compared with an adjusted profit of $1.10 per share a year earlier.
Transat chief executive Annick Guérard says demand for leisure travel remains healthy, as evidenced by higher traffic, but consumers are increasingly price conscious given the current economic uncertainty.
This report by The Canadian Press was first published Sept. 12, 2024.
Dollarama Inc.’s food aisles may have expanded far beyond sweet treats or piles of gum by the checkout counter in recent years, but its chief executive maintains his company is “not in the grocery business,” even if it’s keeping an eye on the sector.
“It’s just one small part of our store,” Neil Rossy told analysts on a Wednesday call, where he was questioned about the company’s food merchandise and rivals playing in the same space.
“We will keep an eye on all retailers — like all retailers keep an eye on us — to make sure that we’re competitive and we understand what’s out there.”
Over the last decade and as consumers have more recently sought deals, Dollarama’s food merchandise has expanded to include bread and pantry staples like cereal, rice and pasta sold at prices on par or below supermarkets.
However, the competition in the discount segment of the market Dollarama operates in intensified recently when the country’s biggest grocery chain began piloting a new ultra-discount store.
The No Name stores being tested by Loblaw Cos. Ltd. in Windsor, St. Catharines and Brockville, Ont., are billed as 20 per cent cheaper than discount retail competitors including No Frills. The grocery giant is able to offer such cost savings by relying on a smaller store footprint, fewer chilled products and a hearty range of No Name merchandise.
Though Rossy brushed off notions that his company is a supermarket challenger, grocers aren’t off his radar.
“All retailers in Canada are realistic about the fact that everyone is everyone’s competition on any given item or category,” he said.
Rossy declined to reveal how much of the chain’s sales would overlap with Loblaw or the food category, arguing the vast variety of items Dollarama sells is its strength rather than its grocery products alone.
“What makes Dollarama Dollarama is a very wide assortment of different departments that somewhat represent the old five-and-dime local convenience store,” he said.
The breadth of Dollarama’s offerings helped carry the company to a second-quarter profit of $285.9 million, up from $245.8 million in the same quarter last year as its sales rose 7.4 per cent.
The retailer said Wednesday the profit amounted to $1.02 per diluted share for the 13-week period ended July 28, up from 86 cents per diluted share a year earlier.
The period the quarter covers includes the start of summer, when Rossy said the weather was “terrible.”
“The weather got slightly better towards the end of the summer and our sales certainly increased, but not enough to make up for the season’s horrible start,” he said.
Sales totalled $1.56 billion for the quarter, up from $1.46 billion in the same quarter last year.
Comparable store sales, a key metric for retailers, increased 4.7 per cent, while the average transaction was down2.2 per cent and traffic was up seven per cent, RBC analyst Irene Nattel pointed out.
She told investors in a note that the numbers reflect “solid demand as cautious consumers focus on core consumables and everyday essentials.”
Analysts have attributed such behaviour to interest rates that have been slow to drop and high prices of key consumer goods, which are weighing on household budgets.
To cope, many Canadians have spent more time seeking deals, trading down to more affordable brands and forgoing small luxuries they would treat themselves to in better economic times.
“When people feel squeezed, they tend to shy away from discretionary, focus on the basics,” Rossy said. “When people are feeling good about their wallet, they tend to be more lax about the basics and more willing to spend on discretionary.”
The current economic situation has drawn in not just the average Canadian looking to save a buck or two, but also wealthier consumers.
“When the entire economy is feeling slightly squeezed, we get more consumers who might not have to or want to shop at a Dollarama generally or who enjoy shopping at a Dollarama but have the luxury of not having to worry about the price in some other store that they happen to be standing in that has those goods,” Rossy said.
“Well, when times are tougher, they’ll consider the extra five minutes to go to the store next door.”
This report by The Canadian Press was first published Sept. 11, 2024.
TORONTO – The U.S. Consumer Financial Protection Bureau has ordered TD Bank Group to pay US$28 million for repeatedly sharing inaccurate, negative information about its customers to consumer reporting companies.
The agency says TD has to pay US$7.76 million in total to tens of thousands of victims of its illegal actions, along with a US$20 million civil penalty.
It says TD shared information that contained systemic errors about credit card and bank deposit accounts to consumer reporting companies, which can include credit reports as well as screening reports for tenants and employees and other background checks.
CFPB director Rohit Chopra says in a statement that TD threatened the consumer reports of customers with fraudulent information then “barely lifted a finger to fix it,” and that regulators will need to “focus major attention” on TD Bank to change its course.
TD says in a statement it self-identified these issues and proactively worked to improve its practices, and that it is committed to delivering on its responsibilities to its customers.
The bank also faces scrutiny in the U.S. over its anti-money laundering program where it expects to pay more than US$3 billion in monetary penalties to resolve.
This report by The Canadian Press was first published Sept. 11, 2024.
