Auto sales declined for a second year in a row in 2019, but it’s unlikely Canada has hit “peak car” just yet, according to a report from Scotiabank Economics.
Year-end sales totaled 1.92 million units, a 3.2% decline over 2018 and 5.7% below 2017’s all-time high of 2.04 million units. Factors such as disposable income, house prices, stock markets, policy rates and consumer expectations contribute to trends in auto sales.
“Limited discretionary spending likely had a role in weaker auto sales in 2019,” says the Scotiabank report, prepared by Rebekah Young, Director, Fiscal & Provincial Economics. “High household debt levels, and more importantly debt service costs, have eaten into nonessential spending.”
Despite the two years of declines in auto sales, the report says Canada has probably not hit “peak car” – the point at which sales will inexorably decline. Slower growth among the “vehicle-driving population” – a group defined as 15- to 64-year-olds – misses the fact that Boomers are hanging on to their licences longer than before and have more disposable income than their younger counterparts. Record-high levels of immigration also point to a potential growth market among that segment of the population.
That said, the report does predict another decline in sales in 2020 to 1.91 million units.
“Consumer confidence and spending remain the biggest downside risk, with no shortage of factors that could knock off these traditionally lagging indicators.”
Read the full report here.