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A Look Back at 2024

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John Fanjoy. Credit: John Fanjoy

It was a year of gradual recovery, with more to come in 2025.

We’re getting close to the end of another year, and 2024 has had a fair share of developments. We entered it with the impacts of the many shocks finally starting to sort themselves out, with supply chain issues finally easing up, and manufacturing coming back toward pre-pandemic normal levels.

Pent-up demand initially soaked up that recovering vehicle supply, and we saw strong growth in vehicle sales throughout the first part of 2024. This began to slow in the third quarter, when September light vehicle sales fell by 2.7% year-over-year according to data from Wards Automotive.

Tariffs against Chinese EVs will likely impact the automotive sector in North America. Credit: Huw Evans

Vehicle demand should remain muted

As we look at the end of 2024 and the beginning of 2025, growth in vehicle demand is likely to remain muted. The Bank of Canada cut the policy rate a few times beginning in June 2024, which had been held at its recent peak of 5% since July 2023. While declining interest rates offered some relief, the previous hikes imposed to slow inflation were still working their way through the Canadian economy.

At this point we’ll mention that, due to the restrictions of year-end publishing schedules, we had to write this well in advance of when you’re reading it. As a result, we’re going to take a more general look at the auto industry than we usually do. At the end of the third quarter, we had an outlook of 1.78 million new-vehicle sales in 2024, and 1.8 million in 2025 as interest rate headwinds ease.

Transitioning to a new normal

We expect 2025 will likely be a period of transitioning to a “new normal,” where the policy rate will level out but settle at a point that’s above what Canadians were used to seeing through the 2010s. During the early part of that decade, interest rates remained low to aid the recovery from the global financial crisis of 2008. That, coupled with globalization, were contributing factors to the central bank being able to maintain a lower policy rate without stoking inflation above its target of 2%, the midpoint of its 1%-to-3% target range.

As more new cars made their way to dealer lots in 2024, we saw used vehicle prices come down, although still not to the low points consumers may have been used to paying five years ago.

Supply chains and trade policies

It’s likely that in the coming years, supply chains will be restructured with more “near-shoring” or “friend-shoring”—transitioning to closer global supply partners, or with countries whose policies are more aligned to make the chains more resistant to potential future shocks. And the automotive sector could very well be impacted by these changes such as in how components and materials are sourced.

A direct example of these changing trade policies affecting the automotive sector are the announcements from Canada, the U.S., and European Union to impose or raise tariffs on Chinese electric vehicles (EVs). We will also be another year closer to Canada’s first interim sales target of 20% zero-emission vehicle sales, which includes battery-electric and plug-in hybrids, by 2026. And the Canadian automotive sector will continue to settle into its “new normal,” where inventory may not be as elevated as pre-pandemic levels, but people will still be able to buy cars. It’s going to be an interesting year ahead.

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