Vehicle sales had not increased this much in 25 years before 2023 and yet the price of cars is rising sharply. What’s going on in the automotive world?
First observation: 11.8% more vehicles were sold in 2023 than in 2022 in Canada, according to DesRosiers Automotive Consultants. This is the largest annual increase since 1997.
“We are talking about the number of vehicles sold, not their value,” underlines the boss of the consulting firm, Andrew King.
Second observation: the average price of a new vehicle in 2023 has crossed the $50,000 mark to stand at $52,900, a first in history.
The price increase is partly explained by “the shortage of semiconductors, the growing share of electric vehicles, the shift to light trucks and inflationary pressures,” according to the expert.
In 2023, the share of SUVs and pickup trucks (pick-ups) in total new car sales reached 85.8%, another record.
“That’s what consumers are looking for, and it’s been that way for many years,” says King.
The decline in car sales began in 2008 in Quebec. “If the trend continues, the last car should be sold in 2028,” says the 2023 edition of theState of energy in Quebec published by the Chair of Energy Sector Management at HEC Montréal.
The popularity of SUVs is pushing the average price up, and to hell with the planet! – an SUV pollutes more than a compact car.
50% increase
Worse yet: Another part of the explanation, according to automotive analytics firm Canadian Black Book, is that the price of small compact cars has climbed 50% since 2020, compared to a 25% rise for SUVs.
The average price of a new car at the end of September 2023 was almost $60,000, compared to just under $40,000 in 2020.
Automakers have stopped producing small subcompact and compact cars in recent years, says Andrew King.
“The removal of some of the most affordable cars from the market has had the effect of increasing average prices,” he says.
The expert also points out that the profit margin for manufacturers is higher on an SUV than on a car.
Whether the margin is higher or not, this is also what the president of HGregoire, John Hairabedian, notes.
“For about five years, manufacturers have convinced consumers with smaller SUVs like the Nissan Qashqai or the Hyundai Kona,” observes the boss of the car dealership chain.
In particular, people want more space in the vehicle they buy, he explains.
“Manufacturers also stopped producing cars to increase production of SUVs,” adds Mr. Hairabedian.