The sunshine-vehicle market contracted by double digits in August, however a trifecta of things drove patrons into the soft seats of luxurious automobiles.

All of it mirrored a mix of automakers focusing manufacturing on high-margin automobiles amid the worldwide microchip scarcity, customers sitting on stacks of pandemic money, and a looming federal levy on car purchases of $100,000 or extra.

General, complete Canadian gross sales in August fell an estimated 11.4 per cent to 146,925 in contrast with August 2020, in keeping with DesRosiers Automotive Consultants (DAC). Moreover, gross sales plunged “a disconcerting 19.2 per cent from August 2019.”

However of the handful of automakers that also report month-to-month gross sales, luxurious manufacturers Acura, Genesis, Lexus and Volvo all posted whopping will increase.

Genesis was the most important gainer, up 416 per cent to 526 models compared with August 2020, though it added two new utility automobiles since then, which accounted for a bulk of the expansion (344 of the 526 gross sales in August). Lexus reported its sixth consecutive month of file gross sales as August quantity rose 27.8 per cent with 2,508 models offered.

‘WEALTH EFFECT’

The largest participant within the trifecta, in keeping with Rebekah Younger, the director of fiscal and provincial economics with a deal with automotive retail at Scotiabank Economics, remains to be the “wealth impact.”

“Anybody with an excellent job and a few fairness [housing or financial markets] has seen their web value improve fairly considerably over the course of the pandemic. With restricted different discretionary spending [on] journey, eating places, and so forth. till lately, there may be in all probability extra discretionary spending directed to items like luxurious automobiles.”

Steve Chipman, CEO of Winnipeg-based Birchwood Automotive Group, mentioned luxurious gadgets, similar to boats, should not straightforward to get proper now, and individuals are nonetheless leery of touring.

“Individuals who have sums of disposable revenue and have giant incomes have nowhere else to purchase.”

Chipman mentioned his group’s luxurious gross sales — together with Lexus automobiles — superior 27.3 per cent in August in contrast with a yr in the past.

Saved wealth in the course of the pandemic may be a crucial issue, nevertheless it’s hardly a shock.

A federal luxurious tax slated for Jan. 1, nevertheless, seems to be already making waves.

Based on the federal Liberals, “The quantity of the tax can be the lesser of 10 per cent of the total worth of the car…or 20 per cent of the worth above $100,000.” The levy will apply to the car’s value after PST, GST or HST are added, a federal Finance Division official mentioned. Ottawa opened public consultations Aug. 10, and stakeholders have till Sept. 30 to make appeals. Some patrons aren’t ready to search out out if the tax goes by way of, nevertheless.

“There might very properly be some pull-forward in purchases forward of [Jan. 1],” mentioned Younger.

Birchwood’s Chipman agrees.

“I’ve talked to our vice-president of luxurious gross sales and a pair normal managers, and that’s the sense they get.”

The story is analogous at Pfaff Automotive Companions, mentioned Chris Pfaff, head of the Toronto-based group. It has 16 dealerships throughout Canada, together with two ultraluxury shops. Pfaff didn’t present gross sales numbers.

The third issue — the microchip scarcity — is not any stranger, however its impression on luxurious gross sales supplies a brand new twist.

Whereas mass-market manufacturers similar to these from the Detroit Three have taken the brunt of the worldwide microchip disaster by way of misplaced manufacturing, automakers have been redirecting microchips to high-margin automobiles, mentioned Sam Fiorani, vice-president of worldwide car forecasting at U.S.-based AutoForecast Options.

FOCUS ON MONEY MAKERS

“These are sensible corporations and they’re making an attempt to deal with the automobiles that make them probably the most cash. However, when the chips dry up, they dry up.”

Luxurious manufacturers should not proof against the scarcity. “I can inform you even a few of that [demand] is being held again as a result of we don’t have sufficient product,” Pfaff mentioned. “Regardless of all of the challenges, that enterprise is extraordinarily sturdy.”

His dealerships are “promoting every thing we will. I don’t know if it’s a panicked shopper listening to you could’t get a automobile, so that you higher get one now. It’s actually weird.”

On the mass-market degree, Subaru was the one model that also studies month-to-month to put up gross sales features in August, up 11 per cent to five,853 models.

Whereas there doesn’t seem like an industrywide consensus on how lengthy it should take for the microchip scarcity to backside out, automaker output was lower additional in September. Globally, 8.25 million vehicles and vans had been taken out of schedules as of Sept. 14 — a rise of about 1.17 million automobiles from two weeks earlier, in keeping with AFS.

Toyota on Sept. 10 introduced plans to slash world manufacturing by 330,000 models in October. The entire hit represents a 40 per cent cutback from its unique October manufacturing plan. It additionally mentioned it should take an even bigger hit than anticipated in September, anticipating to lose one other 70,000 automobiles.

Chipman mentioned his shops will possible discover the cuts beginning in November. In the meantime, he mentioned on Sept. 9 that his group was right down to onethird of regular stock.

“We might get down to twenty per cent of our regular ranges.”

A few of his shops at the moment are lacking month-to-month gross sales targets as a result of there merely isn’t product.