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.”
TORONTO – Roots Corp. may have built its brand on all things comfy and cosy, but its CEO says activewear is now “really becoming a core part” of the brand.
The category, which at Roots spans leggings, tracksuits, sports bras and bike shorts, has seen such sustained double-digit growth that Meghan Roach plans to make it a key part of the business’ future.
“It’s an area … you will see us continue to expand upon,” she told analysts on a Friday call.
The Toronto-based retailer’s push into activewear has taken shape over many years and included several turns as the official designer and supplier of Team Canada’s Olympic uniform.
But consumers have had plenty of choice when it comes to workout gear and other apparel suited to their sporting needs. On top of the slew of athletic brands like Nike and Adidas, shoppers have also gravitated toward Lululemon Athletica Inc., Alo and Vuori, ramping up competition in the activewear category.
Roach feels Roots’ toehold in the category stems from the fit, feel and following its merchandise has cultivated.
“Our product really resonates with (shoppers) because you can wear it through multiple different use cases and occasions,” she said.
“We’ve been seeing customers come back again and again for some of these core products in our activewear collection.”
Her remarks came the same day as Roots revealed it lost $5.2 million in its latest quarter compared with a loss of $5.3 million in the same quarter last year.
The company said the second-quarter loss amounted to 13 cents per diluted share for the quarter ended Aug. 3, the same as a year earlier.
In presenting the results, Roach reminded analysts that the first half of the year is usually “seasonally small,” representing just 30 per cent of the company’s annual sales.
Sales for the second quarter totalled $47.7 million, down from $49.4 million in the same quarter last year.
The move lower came as direct-to-consumer sales amounted to $36.4 million, down from $37.1 million a year earlier, as comparable sales edged down 0.2 per cent.
The numbers reflect the fact that Roots continued to grapple with inventory challenges in the company’s Cooper fleece line that first cropped up in its previous quarter.
Roots recently began to use artificial intelligence to assist with daily inventory replenishments and said more tools helping with allocation will go live in the next quarter.
Beyond that time period, the company intends to keep exploring AI and renovate more of its stores.
It will also re-evaluate its design ranks.
Roots announced Friday that chief product officer Karuna Scheinfeld has stepped down.
Rather than fill the role, the company plans to hire senior level design talent with international experience in the outdoor and activewear sectors who will take on tasks previously done by the chief product officer.
This report by The Canadian Press was first published Sept. 13, 2024.
VANCOUVER – Mediated talks between the union representing HandyDART workers in Metro Vancouver and its employer, Transdev, are set to resume today as a strike that has stopped most services drags into a second week.
No timeline has been set for the length of the negotiations, but Joe McCann, president of the Amalgamated Transit Union Local 1724, says they are willing to stay there as long as it takes, even if talks drag on all night.
About 600 employees of the door-to-door transit service for people unable to navigate the conventional transit system have been on strike since last Tuesday, pausing service for all but essential medical trips.
Hundreds of drivers rallied outside TransLink’s head office earlier this week, calling for the transportation provider to intervene in the dispute with Transdev, which was contracted to oversee HandyDART service.
Transdev said earlier this week that it will provide a reply to the union’s latest proposal on Thursday.
A statement from the company said it “strongly believes” that their employees deserve fair wages, and that a fair contract “must balance the needs of their employees, clients and taxpayers.”
This report by The Canadian Press was first published Sept. 12, 2024.
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.
