Nfld. & Labrador

'I just don't see the downturn': What's behind the bravado of the St. John's car trade

The unemployment rate and the provincial debt may be rising, but so too is confidence among the veterans who sell cars and trucks.

Auto-trade veterans have been buying up land across the province

There are thousands of cars on Kenmount Road waiting to be sold, and that number is only getting bigger. (Sarah Smellie/CBC)

There are thousands of cars sitting still on Kenmount Road, and it has nothing to do with the end-of-the-workday traffic that sputters up and down the hill. 

Look instead to car lot after car lot along one of the business streets in St. John's, where salespeople pull out the stops to put even more cars and trucks in motion. 

In the busiest times of the year, according to car trade veteran Doug Russell, there are as many as 5,000 cars along a strip he calls "dealership row," each of them waiting to be bought.

Despite concerns about the local economy, chances are quite good that those vehicles will indeed sell. 

Doug Russell, owner of Terra Nova Motors, says 70 per cent of his business is trucks. (Sarah Smellie/CBC)

In fact, it's likely the size of the local trade will expand, too. Car dealers in the metro St. John's area have been quietly making huge investments in Newfoundland and Labrador's car business, buying more land to house more vehicles.

Taking the long view 

Their eyes are not on next month's sales figures, or last month's unemployment rate, but instead on generations ahead. 

Russell, for example, just bought more land on Kenmount, adding to the 40 acres he already owns for Terra Nova Motors.

So did Frank Howard, who has been selling cars since 1977 and who now owns five dealerships across the province.

I guess I just don't see the downturn.- Rick O'Neill

Rick O'Neill, who also owns five dealerships around Newfoundland and Labrador, just bought more land on Topsail Road. In June, he will open a new Nissan dealership in Grand Falls-Windsor.

"And we're looking for one or two others," he said.

Rick O'Neill has a dry, quick wit. He says he's getting tired of hearing the provincial government say we're heading for a downturn. (Sarah Smellie/CBC)

Just a few weeks ago, Steele Auto Group, owner of nearly two-dozen dealerships across Nova Scotia and New Brunswick, bought up three of the five dealerships in the province owned by Dan Penney.

All this despite the provincial government hanging its head over a supposedly sputtering economy and a looming, unshakeable deficit.

"I guess I just don't see the downturn," O'Neill said in an interview.

Keep on truckin'

The new vehicles gleaming in the dealership showrooms and lined up outside in the nearby lots are mostly larger vehicles: trucks and sport utility vehicles.

That's likely because the province's appetite for trucks is what's fuelling the market right now. According to data from Statistics Canada, sales of new cars have been declining each year, but truck sales have been growing, year in and year out. 

In fact, from 2012 to 2016, annual sales went up by about 1,000 new trucks each year.

The growth of new truck sales is almost offsetting a decline in new car sales.

There was a small decline overall in new vehicle sales from 2015 to 2016, with numbers falling from 35,000 vehicles sold to just under 34,000.

Frank Howard says in 1984, he sold maybe 25 BMWs a year. Now he sells 250 new and 200 used BMWs a year. (Sarah Smellie/CBC)

But Frank Howard isn't worried about it.

"It equates to four per cent. That's not a big decline," he said.

"You look at our state of the union, or the state of the province, it's not great. A lot of high unemployment, deficits over a billion dollars. But still, people need cars."

Howard's interests include selling the upscale BMW brand. Demand for that is about tenfold what it was when Howard started selling the German imports in the mid-'80s. 

Since trucks are more expensive than cars, the industry is earning more revenue, even with that recent dip in sales.

It's a significant part of the economy. People in the province spent nearly $1.18 billion on new cars in 2016, slightly more than the $1.16 billion spent the year before.

Long drives and tough roads help sales

The three veteran dealers told CBC News that most people in Newfoundland and Labrador need a vehicle for daily life, and it's that need that is driving the steady success in the auto trade.

With long drives between towns on roads that can often be in rough condition, vehicles wear out faster here than they would in many Canadian cities, they said.

That means consumers here need to replace their vehicles more often.

In the capital city area, they noted, there aren't any transportation options other than personal vehicles, cabs and an often-criticized bus system. So people buy cars.

"Having access to a vehicle in Newfoundland is critical to our lifestyle," said Russell.

He sees that lifestyle continuing to prefer trucks over cars.

Terra Nova Motors on Factory Lane in the late 1960s, when it was owned by Doug Russell's father. (Terra Nova Motors)

People feel safer driving on our highways in larger vehicles, he said, and older people — who are a steadily increasing proportion of the population — find bigger, higher vehicles easier to step into.

"Seventy per cent of new vehicle market is pickup trucks and SUVs," said Russell, who can recall a different picture in the late '70s.

"That was the opposite when I got in the business 40 years ago."

On to the next generation

Like most of the province's dealership owners, O'Neill and Russell picked up the car business from their fathers. Howard got into it on his own.

All three men are getting ready to retire and to have their own kids pick up where they leave off: Howard and O'Neill both have sons working with them, and Russell will be handing Terra Nova Motors to his three daughters.

Doug Russell's three daughters will be taking over Terra Nova Motors once he retires. (Sarah Smellie/CBC)

Steele Auto Group's purchase of the Penney dealerships is seen as a new turn for the province's auto-selling industry. Though Steele gets its name from owner Robert Steele, son of famed Newfoundland businessman Harry Steele, there are some who see the deal as a takeover of Newfoundland businesses by a big mainland conglomerate.

And that pattern isn't uncommon in the rest of the country right now, said O'Neill.

I think we're in for some good, strong years.- Rick O'Neill

"There is a fair bit of amalgamation going in the Canadian market," he said.

But all three men expect the Newfoundland model of the family-run dealerships to survive just fine alongside larger companies like Steele.

"[We're] alive and kicking. I think we're in for some good, strong years," said O'Neill.