Car sales expected to slow in Canada

Moderate economic growth driven by slower job creation will slow down car sales in Canada this year, according to a new Scotiabank Economics report released Friday, but new vehicle purchases are still expected to hit the 2- million mark in 2018.

Last year, automakers surpassed the 2- million sales mark for the first time, selling 2.0138 million new vehicles in Canada, as more drivers opted to purchase SUVs and trucks over passenger cars.

That trend is expected to continue through 2018, but vehicle affordability, combined with moderate economic growth thanks to slower job creation and weaker household wealth, will reduce sales in Canada to 2 million units, according to Scotiabank’s Global Auto Report.

Price increases for new cars and light trucks have reduced vehicle affordability to its lowest level in 10 years and may weigh on sales, the report said.

Ontario is expected to post the biggest decline in new vehicle purchases this year, driven largely by pressures of a slower housing market and plunging savings rate. According to the report, Ontario’s savings rate has dropped to 0.6 per cent, 80 per cent lower than the national average of 2.6 per cent.

Last year, the province sold a record 847,000 vehicles, but that total is expected to drop to 821,000 in 2018.

“Slower employment growth will also contribute to an expected 26,000- unit decline in auto sales across the province this year,” Scotiabank senior economist Carlos Gomes wrote in the report.

While Alberta led the way last year in sales growth, posting double- digit gains that signalled the market was finally poised to recover after years of decline, new vehicle purchases in the province are expected to be more moderate this year.

“We expect a further small advance in purchases to 248,000 in 2018, as employment growth has picked up 2 per cent year- overyear, and has fully recovered all the job losses from the recent oil shock,” Gomes wrote.

“However, while companies will continue to renew their vehicle fleets, drilling activity has begun to flatten out, and will not provide much upside support in 2018.”

In Manitoba and Saskatchewan, sales are expected to be flat as job growth slows. After posting declines last year, Quebec is expected to have flat sales in 2018.