In the rear-view mirror
Shortage of vehicle inventory appears to be a thing of the past: industry experts
The persistent shortage of inventory in car lots across Atlantic Canada, a phenomenon which began with the onset of the COVID pandemic, appears to finally be in the rearview mirror, say auto dealers and industry experts.
“The day when there are no cars (on the lot); those days are gone,” said Baris Akyurek, vice-president of insights and intelligence for Autotrader.
Supply chain disruptions, including shortages of microchips needed to operate many functions in a vehicle, and production delays that flared up after March 2020 resulted in fewer automobiles being produced and sold, and many dealer lots being close to empty.
“We estimate 1.5 million fewer vehicles were sold between 2020 and 2023,” Akyurek said. “(Inventory) has been improving since August 2022, as cars are coming back to the market.”
That’s reflected in Autotrader data, which shows that new vehicles now account for 41 per cent of inventory, nationwide, compared to 30 per cent in 2022.
Akyurek said while all manufacturers have more inventory, ome Asian manufacturers are still “a bit” behind compared to North American and European companies.
“They seem to have been impacted by the microchip shortage more,” he said.
The Autotrader data shows that more inventory has meant renewed interest in larger vehicles like trucks and SUVS, which represent 70 per cent of searches on the Autotrader website by Maritimers. Truck searches, specifically, doubled since last year, and actual truck inventory on the ground rose by 51 per cent.
Last year, in comparison, showed “more economical” vehicles ranking higher in search preference, with the research showing it had to do with inventory shortages, higher gas prices and general economic pressure.
Akyurek said increased new car sales also means improvement in the used car sector as buyers trade or sell their old model. “When a new car is sold, 50 per cent of the time, the used car is attached to the new car,” he said. “New car sales are doing pretty well, so there is a direct correlation on used inventory.”
The increase in inventory has actually resulted in an average price decrease for new cars, Akyurek said. He said the average new car price is 10.7 per cent lower compared to February 2023, while interest rates have dipped slightly in the past few months.
“Prices will keep normalizing,” he said. “But we don’t expect to see prices at the level (PRE-COVID), this is the new normal.”
ELECTRIC VEHICLES
Electric vehicles have seen a surge in inventory, a whopping 482 per cent in the past year, Akyurek said. And, just like gas vehicles, EV prices have declined by an average of 9.1 per cent over the last year.
But interest in purchasing an EVE has decreased, according to Autotrader research. A total of 56 per cent of people who do not own an EV are open to purchasing one, lower than the 68 per cent from the previous year’s survey.
“Back in 2022, gas prices went up from $1.40 to $2 due to the Russia-ukraine war,” Akyurek said in regards to why EV interest was higher then.
“There seems to be a direct correlation between gas prices and EV interest.”
Akyurek said while there is still time for the driving public to make the switch to zeroemissions by 2035, the date the Canadian government has set for auto manufacturers to phase out gas vehicles, there doesn’t seem to be a solid plan to get there.
“More education needs to happen, to make sure customers understand how things work out.”
And the Autotrader research shows that, for Canadians who aren’t considering going electric, the major barriers are vehicle prices, interest rates and inflation.
On the ground, many auto dealers say buyers are at least curious about EVS, including full-electric and hybrids.
Tammy Roach, of Charlottetown Mitsubishi, said one of the most popular models is the plug-in hybrid electric vehicle (PHEV) Outlander, which is the top-selling hybrid vehicle in Canada.
“People are realizing it’s the best of both worlds. You can drive in a pure EV, but also have a gas engine to back you up, so there’s no range anxiety.”
Roach said while the dealership has sold more gas vehicles compared to PHEV’S last year, she wouldn’t be surprised if the ratio is reversed by the end of the year.
Overall, Roach says the dealership has been “really, really lucky” with inventory.
During the inventory shortages across the industry, Roach’s dealership was able to pre-sell the majority of cars before they hit the lot.
“Now we have a lot of inventory on deck and ready to go.”
Adam Toner, president of Township Chevrolet Buick GMC in Summerside, P.E.I., and also the president of the P.E.I. Automobile Dealers Association, said demand was strong even during inventory shortages, with many vehicles pre-sold and delivered directly to the client.
And now that inventory has improved and more cars are on the lot, vehicle sales are steadily increasing.
Toner is another auto dealer who is optimistic EVS will continue to grow in popularity, noting the hype surrounding soon-to-be-released models.
“Different manufacturers will be launching a lot of EVS that they’ve been talking about for a few years now,” he said.
Toner said more EVS available will mean customers will have the chance to give them a test drive and “a chance to make up their own opinion” about these vehicles. But he also would like to see both government and manufacturers do their part, including offering incentives to consumers and investment in charging stations and other infrastructure.
USED VEHICLES
The used vehicle market has remained quite strong as well, even as supply of new cars are going up again. Steve Macneil, of Zack’s Auto Sales in Truro, said the rising cost of new cars during the pandemic - as well as the “unsettling time” of higher inflation and interest rates - meant used vehicles caught the eyes of more customers.
“People are seeing the value of used cars,” he said. “People are buying out of necessity rather than luxury.”
Macneil said demand continues to be strong for pre-owned especially now that prices have “dramatically” dropped to close to pre-pandemic levels.
Kevin Peters, chief operating officer of Hickman Automotive Group, owner of dealerships across Newfoundland and Labrador, also referred to the pre-owned market as remaining strong.
Peters points out how preowned has become a more viable option in recent years, especially for a section of the market that previously only purchased new vehicles.
The return of higher inventory numbers for both new and pre-owned is good for every person wanting to purchase a vehicle, as it means consumers once again have more choices, Peters said.
“Consumers now have the flexibility, where they can find a vehicle that suits their needs at a price which suits their budget.”
During the inventory shortage, some consumers weren’t able to buy a vehicle to fit their budget as fewer were available.
But now, there’s been an update in purchases of midsized or smaller vehicles, while other buyers are still interested in pick-up trucks and large-sized SUVS, Peters said.
When it comes to EVS, Peters acknowledges that demand has tapered off a bit, but supply is up and range has continuously improved.
When asked whether the industry is ready for 2035, Peters said, based on supply and demand, the amount of natural resources needed to manufacture components for EVS, and his own gut instinct, he isn’t sure.
“I think it will be tight,” he said. “It’s an aggressive timeline, but a lot can happen in 10 years.”
The other piece of the puzzle is the fact there needs to be more infrastructure to ensure EV drivers can charge up where and when they need to. “If you have 1,000 vehicles all pulling into the filling station to charge, that’s a bottleneck,” he said.
He said infrastructure is important especially in Atlantic Canada where, in some cases, there is “a lot of distance” between communities.
No matter what type of vehicle you’re looking for whether it’s a mid-size sedan or a large pick-up truck, whether the car runs on gas, battery power or a combination of both - there needs to be a strong relationship between a customer and the dealer.
Roach says trust in your auto dealer should be one of the most important things a customer has when wanting to purchase a vehicle.
“(It’s everything from) how you’re greeted; are you treated with respect; are you comfortable with what that person is saying to you; how the service centre treats you after (your purchase); does the dealership do things for their community?”