Canadian car sales break record amid concern about investment in the industry

Canada’s car sellers broke a new record in 2013, surpassing $90 billion in total retail sales for the first time. Revenues at the country’s car dealerships were up 5.7 per cent over 2012. Sales also set a new record, with 1.74 million units sold, according to the Canadian Automobile Dealers Association (CADA).

The chief economist for CADA, Michael Hatch, attributes the strong sales to affordability in the marketplace and strong product choice. Consumers are also “releasing the last of the pent-up demand from the recession,” he said. Many consumers had delayed making a purchase until the economic recovery seemed secure. Hatch called the record sales “great news for the industry but also for the economy at large,” as well as a huge milestone for CADA members.

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Record-breaking $90 billion sales in 2013 is good for the industry and for the economy, according to the Canadian Automobile Dealers Association. But is investment in the manufacturing side drying up?

The $90 billion in sales represents almost 5 per cent of Canada’s GDP, CADA said in a release. Put another way, it is the equivalent of every man, woman and child in Canada spending $2,500. While this level of expenditure contributes to the overall indebtedness of Canadians, since most car buyers have to finance their purchase, the cost of servicing consumer debt has been falling, said Hatch. The availability of consumer financing is an important part of the car retail business, and consumers are managing their debt very well, he said. In the fourth quarter of 2013, the delinquency rate on car loans was just 0.11 per cent, the lowest default rate of all forms of consumer debt, according to Hatch.

While car retailers have reason to celebrate, the picture is not quite so bright for the auto manufacturing sector. A report from the Office of Automotive and Vehicle Research at the University of Windsor states that of the $18 billion invested worldwide in auto plants last year, none of it came to Canada. The report considers only investment that increases a plant’s assembly capacity, either a new plant or an expansion of an existing plant. Canada, the Windsor report says, has slipped from fourth place among the world’s auto assembly nations to tenth place. China, not surprisingly, has been the biggest winner in the scramble for investment, attracting $12.6 billion in 2013, two-thirds of the global total.

The Canadian Automobile Dealers Association (CADA) is the national association for franchised automobile dealerships that sell new cars and trucks. It has 3,300 dealers, who collectively employ over 130,000 people across the country.

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