As we hope for the best and prepare for the worst, CBB is predicting a rough ride.
Canadian Black Book (CBB) has published an analysis of the current COVID-19 situation and how it could impact our industry moving forward.
A little bit of a silver lining is the lower bank rate. With The Bank of Canada cutting rates on March 13 by 50 basis points to 0.75%, money is cheaper, which will be helpful for the automotive industry and auto lending, in particular.
In addition, with the Canadian dollar at a four-year low, exports of used vehicles to the U.S. are more attractive.
On the wholesale side, the supply of new cars may become problematic in the near future, as the supply of parts is scarce due to supplier facility shutdowns. That’s why quality used vehicles will be in greater demand.
The short-term new vehicle supply chain will be impacted, which translates into delivery delays. “If this continues for the next several months,” CBB explains, “we expect to see increased demand on newer, lightly used vehicles. That is expected to cause strengthening of used prices on 0-4-year-old models.
“In the short term, we believe Canadian wholesale values will fall. However as selective shortages of new products occur, and consumers re-enter the market as the environment stabilizes, we foresee strengthening used vehicle values.”
As would be expected, CBB is predicting a significant reduction in Canadian new vehicle sales in 2020, adding that in china, sales fell 22% in January, and 80% in February year-over-year.
CBB also published the following three possible scenarios for Canadian new car sales:
- Best Case Scenario: Slowdown in March / April and resumption of normal activities over the summer, with no major drop in consumer confidence leads to a 10% drop in new sales to 1.72 million units in 2020
- Recession Scenario: Negative GDP growth in Q2 / Q3 (with possible negative growth in Q1 already), a drop in consumer confidence, and a temporary, big jump in unemployment results in a 25% drop in new sales to 1.44 million units in 2020
- Severe Recession Scenario: If there is a prolonged social separation policy due to COVID-19, followed by a deep recession this creates a 40% drop in new sales to 1.15 million units in 2020