Nfld. & Labrador

'We had a good run': N.L. vehicle sales plummet as numbers return to pre-boom levels

The market for light vehicles in Newfoundland and Labrador has been hit hard in recent years, with sales down by 15 per cent since 2013.

More than 5,000 fewer vehicles sold last year than there were in 2013

There were 3,000 fewer passenger cars and light trucks sold in Newfoundland and Labrador in 2018 than were sold the year before. (Sherry Vivian/CBC)

In another sign Newfoundland and Labrador's once-bustling business community is reeling from a storm of economic hard knocks, vehicle sales in the province are in a tailspin.

According to data compiled by Ontario-based DesRosiers Automotive Consultants, just over 30,000 passenger cars, sport utility vehicles and light trucks were sold in the province in 2018.

That's 3,000 fewer than were sold the year before, or a decline of more than nine per cent, which is "one of the most serious negatives" in Canada last year, said veteran auto industry analyst Dennis DesRosiers.

"That's a real red flag," DesRosiers told CBC News.

"You're an outlier, definitely. And it doesn't bode well."

Sticking out like a 'sore thumb'

When compared with the record-setting pace set in 2013, when 35,325 new vehicles rolled off dealership lots in the province, that's a drop of more than 5,000 vehicles, or 15 per cent, over a five-year period.

Dennis DesRosiers, a leading Canadian auto industry analyst, says N.L.'s auto sales last year are 'a real red flag.' (Submitted)

Frank Howard of Capital Auto Group, who leads the Automobile Dealers Association of Newfoundland and Labrador, said sales have returned to pre-economic boom levels. "We had a good run," he said.

But, he added, sales in the St. John's region for the first two months of 2019 are above last year's numbers for the same period, and he remains optimistic about the industry.

Bert Hickman, CEO of the Hickman Automotive Group, said the sale of 30,000 vehicles annually — an average of 82 vehicles daily —  is still a strong number for a province with just over 500,000 people.

"On a per capita basis, that's pretty high," said Hickman, adding that "we need our vehicles" because of the province's expansive geography and limited public transport.

These are the vehicles sales figures for Newfoundland and Labrador over the past two years. (DesRosiers Automotive Consultants)

And after years of wondering just how hot the market would get, Doug Russell, owner of Terra Nova Motors, said the drop in sales is a sign "the economy is adjusting to the current economic realities."

DesRosiers, meanwhile, said 2018 was a slump for auto sales in the country, but most provinces saw declines of one or two per cent, while the biggest market, Ontario, reported an increase in sales.

"[Newfoundland and Labrador] kind of stood out like a sore thumb, being down almost 10 per cent," DesRosiers said.

Dramatic decline

It's a dramatic decline, but appears to be a return to sales figures from a decade ago. That's when the economy was on the path to super-heated status as spending on major projects began to soar, record high oil prices were injecting billions annually into the provincial treasury, and a general confidence was fuelling a spending spree that peaked five years ago.

Doug Russell, owner of Terra Nova Motors in St. John's, says 70 per cent of the vehicles sold at his business are pickup trucks. (Sherry Vivian/CBC)

A combination of factors has since shaken the province's economic foundation, including a collapse of oil prices in late 2014, the conclusion or winding down of major construction projects like the Hebron oil platform, the Long Harbour nickel processing plant, and the Muskrat Falls hydroelectric project.

Thousands of high-paying rotational jobs in Alberta's oilsands have also disappeared, and there have been job cuts and wage freezes for those working in the public sector.

Residents have also been hit with new taxes and fees as the provincial government struggles to cope with punishing annual deficits, and Muskrat Falls, which is billions over budget and years behind schedule, has also rattled nerves as electricity users face the prospect of a doubling of rates in the next few years.

So with confidence and deep pockets replaced by uncertainty and penny-pinching, few are surprised that vehicles sales have plummeted.

If you are hesitant about maintaining employment over the next year or two years … one of the last things you want to do is to go into debt to buy a vehicle.- Dennis DesRosiers

"If you are hesitant about maintaining employment over the next year or two years, you know (there are) dark clouds on the horizon, one of the last things you want to do is to go into debt to buy a vehicle," said DesRosiers.

That's bad news for the province's auto industry, which DesRosiers estimates supports about 10 per cent of the job market.

"Unfortunately they'll have to tighten their belts. And that typically starts with people," he said.

'Worst I've seen'

The used car sector is also hurting, said Keith Gordon, who runs a dealership on Kenmount Road in St. John's.

"This past November, December has probably been the worst I've seen," said Gordon, who's worked in auto sales for more than 35 years.

This past November, December has probably been the worst I've seen.- Keith Gordon

And in a business where sales associates are paid by commission, Gordon said some of his colleagues have walked away.

"The problem with a lot is they can't afford to continue making no money," he said.

Keith Gordon, who owns a used vehicle dealership on Kenmount Road in St. John's, says November and December were the worst months he's ever seen. (Sherry Vivian/CBC)

In response, places like Terra Nova Motors are doing things differently. In the past, they would bring in hundreds of vehicles, knowing the market was robust enough to clean out the inventory.

"There were more people out there making the bigger incomes and money was flowing easier," Doug Russell said.

Russell said dealers are now being more selective in what, and how much, they display on their lots.

With shrinking sales numbers, vehicle dealers are responding with deals like zero per cent financing for up to 84 months on select models. (Sherry Vivian/CBC)

Meanwhile, sales volumes may be down, but still remain much stronger than the 22,000 new vehicles sold in 2000, and only slightly fewer than the 31,580 sold in 2010.

And there are signs the economy is stabilizing, with the January 2019 unemployment rate at 13.2 per cent, which is 3.5 percentages points lower than January 2018. However, it remains significantly higher than the national rate of 5.8 per cent.

 "We're hoping 2019 will make some changes. That's all we can hope for," said Keith Gordon.

Read more from CBC Newfoundland and Labrador

About the Author

Terry Roberts is a journalist with CBC's bureau in St. John's.

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