Sales soar as Canadians develop taste for luxury SUVs
Canadians have long prided themselves on having different (read: better) taste in vehicles than their American neighbours, with a penchant for small, sensible cars such as the best-selling Honda Civic or Hyundai Elantra.
Suddenly, though, we’ve developed a taste for luxury. Canada is quickly catching up to the United States in luxury sales as a percentage of the new vehicle market and we’re doing it in the showiest way possible — with high-end sport utility vehicles.
Sales of luxury vehicles rose 12 per cent through the end of May and now account for a record 10 per cent of the new vehicle market, according to Scotiabank’s global auto report released this week.
This is rapidly approaching the 12 per cent share that’s typical in the U.S., said Carlos Gomes, senior economist and auto industry specialist at Scotiabank.
“On a per-capita basis, Canadian household net worth is rapidly narrowing the gap with the United States, enabling more Canadians to become upscale shoppers,” he wrote.
Although all luxury vehicles are selling well, high-end SUVs are by far the fastest growing segment of the market with sales up more than 80 per cent this year, according to Gomes, who attributed the increase to lower gas prices.
Industry analyst Dennis DesRosiers disputes this, however.
“Listen, if you can afford a luxury vehicle you don’t worry about gas prices,” DesRosiers, president of DesRosiers Automotive Consultants Inc., said in an interview.
Instead, DesRosiers chalks the strength in luxury-vehicle sales up to wealthy baby boomers, more affordable financing options and “spectacular product.”
“The product that’s available up in those segments is stunning,” he said. “That’s the allure. It’s the ultimate candy, the ultimate toy.”
This is especially true as cars become increasingly high-tech, with new features added to luxury vehicles before they make their way into cheaper brands.
But it’s not just the high end of the segment that’s selling — the luxury brands have also been moving down-market in an attempt to appeal to younger, entry-level buyers.
“They’re really broadening their product line, trying to catch every little niche out there, but also moving down-market,” DesRosiers said.
Recent additions to the lower end of the luxury scale include the Mercedes CLA and the Audi A3.
But Gomes said it’s really the higher-end vehicles that are driving luxury sales this year.
“If you look at the data in the last couple of years, the entry-lev- el segment is actually becoming a smaller portion of overall luxury,” he said in an interview.
“I think it was important in attracting buyers to models originally, but now what we’re seeing is the stronger growth is occurring both in the mid-luxury and upper-luxury segment as opposed to the entry level.”
Remarkably, the Canadian luxury-vehicle boom is nearly universal, with the only exception being Newfoundland and Labrador. Even oil-dependent Alberta has seen luxury volumes tick up this year.
British Columbia is by far the leader, though, with luxury vehicles accounting for 15 per cent of overall new vehicle sales due in large part to a concentration of wealthy baby boomers.
“If you look at the net worth per household, it’s significantly higher in British Columbia than it is in the rest of Canada,” Gomes said. “We’re talking something in the order of 30 per cent higher.”