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.”
TOKYO (AP) — Japanese technology group SoftBank swung back to profitability in the July-September quarter, boosted by positive results in its Vision Fund investments.
Tokyo-based SoftBank Group Corp. reported Tuesday a fiscal second quarter profit of nearly 1.18 trillion yen ($7.7 billion), compared with a 931 billion yen loss in the year-earlier period.
Quarterly sales edged up about 6% to nearly 1.77 trillion yen ($11.5 billion).
SoftBank credited income from royalties and licensing related to its holdings in Arm, a computer chip-designing company, whose business spans smartphones, data centers, networking equipment, automotive, consumer electronic devices, and AI applications.
The results were also helped by the absence of losses related to SoftBank’s investment in office-space sharing venture WeWork, which hit the previous fiscal year.
WeWork, which filed for Chapter 11 bankruptcy protection in 2023, emerged from Chapter 11 in June.
SoftBank has benefitted in recent months from rising share prices in some investment, such as U.S.-based e-commerce company Coupang, Chinese mobility provider DiDi Global and Bytedance, the Chinese developer of TikTok.
SoftBank’s financial results tend to swing wildly, partly because of its sprawling investment portfolio that includes search engine Yahoo, Chinese retailer Alibaba, and artificial intelligence company Nvidia.
SoftBank makes investments in a variety of companies that it groups together in a series of Vision Funds.
The company’s founder, Masayoshi Son, is a pioneer in technology investment in Japan. SoftBank Group does not give earnings forecasts.
Shopify Inc. executives brushed off concerns that incoming U.S. President Donald Trump will be a major detriment to many of the company’s merchants.
“There’s nothing in what we’ve heard from Trump, nor would there have been anything from (Democratic candidate) Kamala (Harris), which we think impacts the overall state of new business formation and entrepreneurship,” Shopify’s chief financial officer Jeff Hoffmeister told analysts on a call Tuesday.
“We still feel really good about all the merchants out there, all the entrepreneurs that want to start new businesses and that’s obviously not going to change with the administration.”
Hoffmeister’s comments come a week after Trump, a Republican businessman, trounced Harris in an election that will soon return him to the Oval Office.
On the campaign trail, he threatened to impose tariffs of 60 per cent on imports from China and roughly 10 per cent to 20 per cent on goods from all other countries.
If the president-elect makes good on the promise, many worry the cost of operating will soar for companies, including customers of Shopify, which sells e-commerce software to small businesses but also brands as big as Kylie Cosmetics and Victoria’s Secret.
These merchants may feel they have no choice but to pass on the increases to customers, perhaps sparking more inflation.
If Trump’s tariffs do come to fruition, Shopify’s president Harley Finkelstein pointed out China is “not a huge area” for Shopify.
However, “we can’t anticipate what every presidential administration is going to do,” he cautioned.
He likened the uncertainty facing the business community to the COVID-19 pandemic where Shopify had to help companies migrate online.
“Our job is no matter what comes the way of our merchants, we provide them with tools and service and support for them to navigate it really well,” he said.
Finkelstein was questioned about the forthcoming U.S. leadership change on a call meant to delve into Shopify’s latest earnings, which sent shares soaring 27 per cent to $158.63 shortly after Tuesday’s market open.
The Ottawa-based company, which keeps its books in U.S. dollars, reported US$828 million in net income for its third quarter, up from US$718 million in the same quarter last year, as its revenue rose 26 per cent.
Revenue for the period ended Sept. 30 totalled US$2.16 billion, up from US$1.71 billion a year earlier.
Subscription solutions revenue reached US$610 million, up from US$486 million in the same quarter last year.
Merchant solutions revenue amounted to US$1.55 billion, up from US$1.23 billion.
Shopify’s net income excluding the impact of equity investments totalled US$344 million for the quarter, up from US$173 million in the same quarter last year.
Daniel Chan, a TD Cowen analyst, said the results show Shopify has a leadership position in the e-commerce world and “a continued ability to gain market share.”
In its outlook for its fourth quarter of 2024, the company said it expects revenue to grow at a mid-to-high-twenties percentage rate on a year-over-year basis.
“Q4 guidance suggests Shopify will finish the year strong, with better-than-expected revenue growth and operating margin,” Chan pointed out in a note to investors.
This report by The Canadian Press was first published Nov. 12, 2024.
TORONTO – RioCan Real Estate Investment Trust says it has cut almost 10 per cent of its staff as it deals with a slowdown in the condo market and overall pushes for greater efficiency.
The company says the cuts, which amount to around 60 employees based on its last annual filing, will mean about $9 million in restructuring charges and should translate to about $8 million in annualized cash savings.
The job cuts come as RioCan and others scale back condo development plans as the market softens, but chief executive Jonathan Gitlin says the reductions were from a companywide efficiency effort.
RioCan says it doesn’t plan to start any new construction of mixed-use properties this year and well into 2025 as it adjusts to the shifting market demand.
The company reported a net income of $96.9 million in the third quarter, up from a loss of $73.5 million last year, as it saw a $159 million boost from a favourable change in the fair value of investment properties.
RioCan reported what it says is a record-breaking 97.8 per cent occupancy rate in the quarter including retail committed occupancy of 98.6 per cent.
This report by The Canadian Press was first published Nov. 12, 2024.
