New auto and truck sales in Alberta continue to be hurt by a number of factors, including low inventory, high interest rates and the state of economic uncertainty across the country.
The number of new vehicles sold in Alberta fell 4% year over year in June, according to a report by ATB Financial. But the situation is not unique to Alberta.
Nationally, the number of vehicles sold fell 10% in June compared to the same month last year.
Rob Roach, deputy chief economist at ATB Financial, said car and truck sales in Alberta are still below pre-pandemic levels.
“The pandemic hit in 2020 and a number of car lots had to close. People weren’t buying and they were worried about spending money,” he said.
Although things have bounced back a bit in 2021, Roach said vehicle sales were still negatively impacted by the lack of inventory and global shortage of microchips. This year, the situation has only gotten worse with increase in interest rates and the economic impact of the war in Ukraine – a country that happens to be a major producer of wiring harnesses, a key component for electrical operations in cars.
In the first half of this year, the number of new cars and trucks sold in Alberta was 19% lower than the same period in 2019. Across the country, vehicle sales between January and June 2022 fell by 21 % compared to the first half of 2019.
Roach said even before the pandemic, vehicle sales were on a downward trend in Alberta. The province’s economy just isn’t as strong as it was in 2014, and with less extra money to spend, individuals and businesses aren’t buying new vehicles as much, Roach said. .
Empty lots across the province
Gerald Wood, president of the Motor Dealers’ Association of Alberta, said auto dealers in the province are facing many challenges after more than two years of the pandemic, but demand still remains quite high. The problem is that the supply hasn’t been able to keep up.
Wood said the low inventory situation isn’t exactly as bad as it looks.
“In the province of Alberta, you see a lot of [dealership] lots that seem empty. In some cases they actually are,” he said.
“A lot of people look and say, ‘Wow, they don’t have to sell anything. “”
However, Wood said, what often happens now is that most vehicles will already be sold by the time they arrive at a dealership. So there simply weren’t enough products to display in bundles.
High vehicle prices have helped auto dealers, Wood said. The value of vehicle sales in Alberta rose 8% in June compared to the same month last year, according to ATB. This figure was only 2% nationally.
Despite inflation, the value of vehicle sales for the entire first half of 2022 fell 5% in Alberta compared to the same period in 2019. Nationally, the value of sales fell 8 % over the same comparison period.
According to Wood, the whole process of selling cars has changed over the past two years. Rather than test drive and pick up a car in a relatively short time, many consumers are now buying through factory orders, Wood said.
“So the consumer comes in, identifies the components they want on the vehicle, and then the dealership works with the manufacturer to get time on the production schedule. And then it’s built, shipped,” he said. .
What used to be a six- to eight-week new-car buying process has almost doubled in time, Wood said.
Ken Sorensen, executive director of the Alberta Automotive Recyclers and Dismantlers Association, said the low inventory of new vehicles has actually helped his industry.
Sorensen finds that more people are hanging on to their cars and trucks longer due to the difficulty of buying new vehicles. When these older cars need repairs, consumers struggle to find parts at dealerships, Sorensen said.
“If you go to a dealership and they tell you…maybe a four month backlog on parts, why not get the same part back from an auto recycler?” he said.
Future prospects and consumer advice
Roach said the auto industry expects the microchip shortage to eventually resolve itself, but the timeline for that is unclear, especially since the geopolitical conflict continues in Taiwan — a major producer of computer chips.
And even if the microchip shortage eases in the near future, Roach said that as long as interest rates are high and there is general economic uncertainty, new vehicle sales will not skyrocket by so early.
“In the near term, likely still challenging times lie ahead for auto dealers in Alberta and across the country,” he said.
For the average consumer looking to buy a new car or truck, Wood recommends waiting for a factory order so buyers can get the exact features of a vehicle they’re looking for, rather than having no luck. to find something similar at a dealership.
And his biggest piece of advice: “Patience is the key.”