Progress in Canada’s luxury-vehicle section reveals no signal of abating, as customers proceed to flock to them regardless of increased rates of interest and chronic inflation.
As soon as a “very, very small” portion of Canadian car gross sales, the posh market has been “rising persistently” over the previous 20 years, mentioned Andrew King, managing associate at DesRosiers Automotive Consultants Inc.
Within the first half of 2023, luxurious gross sales accounted for 12.9 per cent of whole car gross sales in Canada, up from 12.5 per cent in 2022 and 11.9 per cent in pre-pandemic 2019.
A variety of long- and short-term elements are feeding the good points, King mentioned.
“The 20-year progress has been pushed loads by demographics,” he mentioned. “There’s an enormous variety of child boomers in Canada who at the moment are of their peak luxury-buying years, and that’s been a really robust issue.”
King additionally credit the growth of the posh manufacturers’ mannequin lineups as key to the broader enchantment of the high-end market.
In a sign of how far luxurious gross sales have come over the previous 20 years, the Brampton, Ont.-based Policaro Group broke floor July 14 on a brand new Lexus dealership to exchange a close-by retailer that had outgrown its footprint.
The unique Northwest Lexus location opened in 2001 and was scoped to promote about 300 vehicles per yr. It’s now retailing greater than 1,000 yearly, and the substitute location shall be sized accordingly, with 3 times the ground house deliberate.
The dealership group’s CEO, Francesco Policaro, mentioned he expects the posh section to proceed gaining floor, with increased rates of interest and inflation doing little to discourage consumers to date. He additionally expects Canada’s excessive ranges of immigration — resulting in the arrival of extra expert, well-paid new residents — to translate into increased luxurious gross sales.
‘IT LOOKS VERY STABLE’
Toyota Canada Inc. and its Lexus unit are additionally forecasting progress throughout Canada, although not essentially a gross sales growth.
“It seems very secure. Inhabitants progress is powerful, [and] basic economics are clearly robust,” mentioned Toyota Canada CEO Larry Hutchinson.
Lexus bought 16,243 automobiles in Canada within the first six months of 2023, a brand new excessive for the model. This compares with 12,115 models bought over the identical interval final yr and 12,321 in the course of the first half of 2019, earlier than the pandemic and ensuing provide chain issues crimped car output.
Lexus accounted for 15.1 per cent of Toyota Canada’s whole gross sales via the primary half of 2023, in contrast with 11.6 per cent and 10.2 per cent of whole gross sales in 2022 and 2019, respectively.
Whereas car manufacturing has improved over the previous six months, demand continues to outpace provide, Hutchinson mentioned. Meaning Lexus dealerships are nonetheless seeing “quite a lot of pent-up demand.”
As with Policaro, Hutchinson mentioned Lexus has not seen any indication that consumers are leaving the posh market due to increased rates of interest. On July 12, the Financial institution of Canada raised its benchmark price to 5 per cent, its highest degree in additional than 20 years.
Finally, King mentioned, the upper rates of interest will “chew” the posh market, however the short-term outlook for the section is “definitely” optimistic.
Coupled with the long-term demographic developments fueling luxurious gross sales, King mentioned, the highest half of Canadian earners have been placing away massive quantities of cash for the reason that begin of the pandemic and are discovering new methods to dispense it.
“There’s some huge cash there,” he mentioned, “and also you see them spending it on journey, clearly, and on eating places and on luxurious automobiles.”