Canada: Auto sales pick up speed even as economy sputters

The Globe and Mail - Auto makers racked up solid sales in North America last month, signalling that the industry's recovery is jumping into a higher gear despite a sluggish economy and worries about high consumer debt.

The most positive news came out of the U.S. market, which hit 14.9 million sales on a seasonally adjusted annual basis, its best performance since before the 2008-2009 financial crisis sent sales plunging and two of the Detroit Three auto makers into Chapter 11 bankruptcy protection.

Canadians also contributed to the rebound as they drove off dealers' lots in the highest numbers since September, 2000.

It has been a slow but steady recovery and a healthy one, because sales – particularly in the U.S. – have not been driven by the hefty incentives of the 2000s that led to record deliveries but massive losses at the Detroit Three auto makers.

A recovery in housing, stable levels of employments, easing credit and the need to replace aging cars are behind the relative strength in the U.S. market, industry analyst Brian Johnson of Barclay's Capital Inc. in New York wrote in a note to clients.

The Canadian performance was slightly different last month with plenty of incentives available, but stronger economic fundamentals have helped bolster Canada's vehicle market for more than a year.

Canadians bought 143,143 cars and trucks last month, compared with 134,544 a year earlier. That was the second-best level for September sales.

Fuel efficiency appeared to be weighing on U.S. motorists as gasoline prices stayed high at about $3.80 (U.S.) a gallon.

"September was Ford's best small car sales month in a decade," Ken Czubay, Ford Motor Co.'s vice-president of U.S. marketing, sales and service, said on a conference call with analysts and reporters. That performance was led by the Focus compact with a 91-per-cent sales increase from year-earlier levels.

Sales of GM's most fuel-efficient vehicles soared 97 per cent, Kurt McNeil, vice-president of U.S. sales operations for General Motors Co., said on that auto maker's monthly conference call.

"I think there is a fundamental shift – truck to car – that we have seen taking place over the last few years," said Don Johnson, vice-president of sales and service for GM's Chevrolet division. "Consumers, because of the price of fuel, have definitely shifted over the last couple of years to a stronger mix on the car side."

While the sales numbers are from one month, signs of strength from the Detroit Three will come as welcome news to Canada's auto parts sector, which took a severe battering during the recession amid deep cuts in auto production in North America.

Toyota Motor Sales USA Inc. said sales of the compact Corolla soared 43 per cent, while Prius deliveries more than doubled.

American Honda Inc. said sales of the compact Civic surged 62 per cent.

Chrysler Group LLC posted a 12-per-cent gain that marked its 30th straight year-over-year sales increase. Chrysler also appeared to benefit from fuel economy worries. Its car sales rose 42 per cent.

Ford Motor Co. of Canada Ltd. grabbed top spot in the Canadian sales race, despite an 8-per-cent slide from year-earlier levels. Ford was offering employee pricing last month and interest-free loans for six years on Focus compacts and five years on Fiesta subcompacts.

The 34th straight sales increase for Chrysler Canada Inc. propelled it into second place.

General Motors of Canada Ltd. jumped back into positive territory with a 12-per-cent increase after several months of declines.

All three, however, were outpaced by some of the Germany and Japan-based companies. Toyota Canada Inc. sales rose 22 per cent, BMW Canada Inc. notched a 20-per-cent gain, Volkswagen Canada Inc. posted an 18-per-cent leap, Honda Canada Inc. sales jumped 16 per cent and Mercedes-Benz Canada Inc. sales advanced 13 per cent.