The Canadian vehicle market skidded to its worst performance of the year in August as a pullback in leasing hurt sales and the slump battering the U.S. market spilled over the border.
Vehicle sales tumbled 7 per cent in Canada, paced by big declines at Chrysler Canada Inc., General Motors of Canada Ltd. and Honda Canada Inc.
Double-digit slides at those three auto makers and Ford Motor Co. of Canada Ltd. overshadowed record August sales for BMW Canada Inc., Mercedes-Benz Canada Inc., Subaru Canada Inc. and Toyota Canada Inc.
Moves by Chrysler and GM to dramatically scale back vehicle leasing in Canada contributed to their sales drops of 25 and 17 per cent respectively, dealers and analysts said yesterday.
The leasing move probably accounts for 10 percentage points of the Chrysler slump, said one dealer, who pointed out that some dealerships relied on leasing for up to 65 per cent of their sales and will have trouble adjusting to the shift away from leasing.
"It certainly has had an impact on the market," said analyst Richard Cooper, vice-president of the Canadian operations of consulting firm J.D. Power and Associates.
"GM and Chrysler have pulled back the most and have lost the most," Mr. Cooper said.
Leasing has been an attractive alternative for consumers because monthly payments can be considerably lower, even when buyers borrow money at low interest rates.
About 60 per cent of Chrysler customers were leasing their vehicles at the beginning of the year.
Data from the consulting firm's Power Information Network shows that percentage fell to 10 per cent by late August, Mr. Cooper said.
At GM, he said, leasing fell to just 2 per cent of sales last month versus 43 per cent early in 2008.
In addition, consumers are becoming skittish about buying new vehicles, analysts said.
Employment growth is slow "and people are getting a bit more worried that [the economy] is going to slow down," noted Dina Cover, a Toronto-Dominion Bank economist.
In addition, Ms. Cover said, price reductions by auto makers helped spark sales earlier this year but have now been factored in by consumers.
Toyota, however, cut prices on several of its models for the second time in two months yesterday, despite being among the leaders in companies that bucked the downdraft last month.
Toyota recorded a 29-per-cent jump, which enabled it to leapfrog Chrysler into second place in the Canadian market.
In the battle for luxury leadership, BMW stayed ahead of Mercedes-Benz, despite a 48-per-cent surge in sales of Mercedes-Benz and its smart brand vehicles.
Honda said its decline was caused by short supplies of its Fit subcompact and Civic compact cars, two of the most popular vehicles in its lineup.
The numbers for auto makers in the U.S. market were even uglier. A 20-per-cent slide for General Motors Corp. was the strongest performance among the Detroit Three.
Sales for Chrysler LLC plunged 34 per cent, which barely kept it ahead of Nissan Motor Co. Ltd. for fifth spot in the U.S. market.
Nissan was the only auto maker among the Big Six (the Big Three plus Toyota, Nissan and Honda) to post a gain in the U.S. market last month.
Ford Motor Co. sales dropped 26 per cent, while Honda Motor Co. Ltd. and Toyota Motor Corp. experienced declines of 7 and 9 per cent respectively.
"We expect the second half of 2008 will be more challenging than the first half, as weak economic conditions and the consumer credit crunch continues," Jim Farley, Ford's group vice-president of marketing and communications, said in a statement.
FORD MOTOR CO. (F-N)
Close: $4.57 (U.S.), up 6 cents
GENERAL MOTORS (GM-N)
Close: $11.27, up 62 cents
TOYOTA MOTOR CORP.
Close: $90.04, up $1.21
© The Globe and Mail
