Auto Service World
News   March 22, 2024   by Adam Malik

Will new vehicle sales growth eventually drop off?

There has been a recovery in new vehicle sales, an important signal for the future of the automotive aftermarket. But how much longer can it last?

DesRosiers Automotive Consultants reported February 2024 new sales were the highest ever for the month. Canada has seen 16 straight months of year-over-year improvement.

The consultancy credited the movement to pent-up demand caused by consumers’ inability to replace their older vehicles, either out of desire or need. Managing partner Andrew King noted that supply constraints “are now well and truly in the rear-view mirror.”

But Todd Campau, aftermarket practice leader at S&P Global Mobility, cautioned during AAPEX 2023 that there are challenges taking place that are working against growth continuing.

One, pent up demand can’t go on forever. He sees it eventually dissipating, if it hasn’t already.

“We don’t think pent-up demand is there anymore. We believe that the economic situation that we went through over the past year has really kind of destroyed that demand rather than delayed that demand,” he said during his presentation, Trends Impacting the North American Aftermarket.

“Because what we’ve essentially seen is, we had supply constraints through much of late ’21 and ’22 when we couldn’t get microchips and all those things. That has shifted to being demand constraints — so consumers are slowing in their purchasing now. Inventories are building that dealership lots.”

Campau doesn’t think we’re going to get to a point where dealership lots become overstocked with inventory as vehicles will still sell. Just maybe not as quickly as we’re used to.

“I think they’ve learned a lot about the consumer and that may change their behaviour on the new vehicle inventory levels … but it certainly has recovered,” he added.

Some of those changed behaviours include being willing to buy a vehicle online or wait for the vehicle they want, rather than take one in the showroom.

“And so I think we’re probably about at a level of in inventory where we’re going to live going forward,” Campau said.

And prices are still high for new vehicles. DesRosiers reported third-quarter data that show the average transaction price for a light vehicle was at nearly $53,000, up almost 6 per cent from the end of 2022. It’s a similar story in the U.S. where the price of a new vehicle sits at nearly US$46,000, according to S&P Global Mobility. But prices south of the border have been flat over the last few quarters.

“The past few years, I’ve been telling you that I don’t know if [high prices are] sustainable. And I’m still not sure it’s sustainable,” Campau said.

Also factoring in is the lack of rebates being offered by manufacturers. Right now, there are about half the number of rebates or deals today compared to the past.

“OEs really seem to be showing a reluctance to put the money back on the hood that they used to put on the hood because they just don’t have to right now,” Campau said.

“And so far, consumers are continuing to buy those vehicles, which kind of surprises me at that price level.”

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