In this week’s Faceoff, AutoCanada Inc. saw revenues jump by 76 per cent, while Sonic Automotive saw a similar bump of only 59 per cent.
If you’ve bought a used car this year, odds are you experienced a bit of sticker shock. An article by CTVNews.ca last month shows that the average price of a used car on AutoTrader.ca increased roughly 13 per cent from July 2020 to July 2021.
A shortage of microchips has led to fewer new cars being manufactured. This increases consumer demand for used cars and pushes up prices. AutoCanada operates franchise automobile dealerships across Canada and in the state of Illinois. The company sells both new and used vehicles.
In its second-quarter fiscal 2021 results, the company reported revenues of $1.3 billion, up from $727 million the prior year driven by an increase in used car sales of $339 million. Overall net income for the period is up to $38 million, from a $20-million net loss in 2020 driven by improved gross margins.
Warren Barnard, executive director at the Used Car Dealers Association of Ontario, notes that there are both demand and supply factors that have increased the price of used cars.
“A lot of experts were surprised that the demand early on in the pandemic was as strong as it was. In fact, to a large degree, (the demand) had increased as people from larger cities, who may not have been in the market for a vehicle, had issues with transit and ride share,” Barnard noted.
From a supply perspective, Barnard explained that the original equipment manufacturers “miscalculated what demand would be for new vehicles,” which led to manufacturers reducing or cancelling orders for microchips. As a result, there were fewer cars on hand and lead times increased for new cars. Both factors have driven up demand for used cars, whereby possession is within a few weeks instead of a few months.
For those of you holding out for a new car, Barnard cautions that “the chip shortage does not look like it will end until at least 2022.”