In auto racing, a record lap time is the outcome when everything is working just right. It’s proof that all the preparation has paid off. It’s the result. It’s the goal.
But does that apply to a record two million vehicles sold in Canada in 2017? To assume that the health of Canada’s auto market is determined only by the volume of metal pushed over the curb is no different than evaluating a new car based solely on its color.
Is two million any better than 1,999,999, other than the one vehicle that makes the difference? No, and there are other numbers that are likely more important, such as the forecast drop in used-vehicle values that could drive up the cost of leasing. Or, that more buyers are upside-down -- their vehicles are worth less than they owe -- due to longer-term financing aimed at keeping the advertised monthly payments competitive. Remember when 48 months was the long term? Today, 84 months is common.
Another concerning number is the growing dollar value of incentives that automakers are throwing at vehicles just to move them. One might say this artificially drives up sales numbers. And while 72 percent sounds like a good number for the chunk of the sales pie carved out by higher-profit trucks, that puts stress on the auto plants that produce cars. Canadian manufacturing is fragile enough without the worry that car lines such as the Chevrolet Impala, built in Oshawa, Ont., could be dropped. Looming interest-rate increases could also put a dent in future sales. There are a lot of numbers to look at other than two million.
What really matters is that sales are healthy -- not necessarily record setting -- and that profit margins are sufficient for dealerships to operate. In a recent Automotive News Canada story, Toyota Canada CEO Larry Hutchinson’s idea of healthy is anything above 1.7 million units a year.
Perhaps most importantly, the market must not be ruined by reckless financing offers just to increase sales volume in the short run. There are potentially devastating long-term consequences to such practices.
“A record two million vehicles sold” makes for great -- and easy -- headlines but it’s just a number. One number.
