‘Concerning’ month for new vehicle sales

It seems pent-up demand for new vehicles is dissipating and new vehicle sales numbers are reaching a level of concern.

Canadian new light vehicle sales in May 2024 reached 169,000 units, according to DesRosiers Automotive Consultants. On one hand, that’s a notable improvement over the previous two years — almost 6 per cent better than 2023 and 20 per cent higher than “the pitiful” numbers of 2022 when supply shortages hurt inventories. On the other, that’s still well behind the 200,000 mark last seen in May 2019.

The seasonally adjusted annual rate (SAAR) for May 2024 was 1.63 million units, marking the lowest SAAR recorded so far this year. Despite this, the automotive market continues to show some level of growth, now marking 19 straight months of year-over-year gains.

“It is somewhat concerning (if not unexpected) that the SAAR appears to be trailing off from the levels hit in January and February when pent-up demand fuelled the market to lofty heights,” said Andrew King, managing partner at Desrosier. “However, we have now seen 19 consecutive months of year-over-year gains, and the market continues to move forward, albeit supported by an increasing range of sub-vented interest rates and other incentives.”

What may work in the industry’s favour is a reduction in interest rates. In a widely expected move, the Bank of Canada cut the number to 4.75 per cent, the first cut since March 2020. With inflation easing, more cuts can be expected. Speculation is there could be two or three more cuts by the end of the year.

However, Bank governor Tiff Macklem warned against moving the interest rate down too quickly and jeopardizing progress.

In the U.S., though, it’s a different story where the economy is said to be still too hot to move rates down. Job numbers in June came in with nearly 90,000 new jobs added than expected in May

“Inflation appears to be stuck in a range and there will need to be several consecutive months of undeniable proof that it is finally moving down at a clip, rather than a crawl, before any action is taken,” said Nigel Green, the chief executive of financial advisory firm deVere Group. “This is simply not happening at the moment and there’s no reason to suggest it will next month or the month after that.”