Before 2023, vehicle sales had not increased this much in 25 years and yet car prices are still rising sharply. What's going on in the automotive world?
First observation: According to DesRosiers Automotive Consultants, 11.8% more vehicles were sold in Canada in 2023 than in 2022. This is the largest annual increase since 1997.
“We are talking about the number of vehicles sold, not their value,” emphasizes the head of the consulting firm, Andrew King.
Second observation: The average price of a new car in 2023 has exceeded the $50,000 mark and stands at $52,900, a first in history.
The price increase is partly due to “the shortage of semiconductors, the growing share of electric vehicles, the shift to light trucks and inflationary pressure,” he said.
In 2023, the share of SUVs and pickup trucks in total new car sales reached 85.8%, another record.
“This is what consumers are looking for and has been for many years,” says King.
The decline in car sales began in Quebec in 2008. “If the trend continues, the last car is expected to be sold in 2028,” says the 2023 edition of the State of Energy in Quebec, published by the Chair of Energy Sector Management at HEC Montreal.
The popularity of SUVs is driving up the average price – and to hell with the planet! – An SUV pollutes more than a small car.
Increase by 50%
Worse still, another part of the explanation, according to automotive analytics firm Canadian Black Book, is that the price of small compact cars has risen 50% since 2020, compared to a 25% increase for SUVs.
The average price of a new car was nearly $60,000 at the end of September 2023, compared to just under $40,000 in 2020.
Automakers have stopped producing small subcompact and compact cars in recent years, according to Andrew King.
“The removal of some of the cheapest cars from the market resulted in average prices rising,” he says.
The expert also points out that the profit margin for manufacturers is higher for an SUV than for a car.
Regardless of whether the margin is higher or not, HGregoire President John Hairabedian also notes this.
“Manufacturers have been convincing consumers with smaller SUVs such as the Nissan Qashqai or the Hyundai Kona for around five years,” observes the boss of the car dealership chain.
Above all, people want more space in the vehicle when buying, he explains.
“Manufacturers also stopped producing cars to increase production of SUVs,” Mr. Hairabedian added.
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