Canadians ignored the anemic economic recovery and warnings about mushrooming household debt to drive 1.676 million vehicles off car dealers' lots in 2012, with favourable financing conditions propelling the industry to the second-highest sales year on record.
The best year since the record-setting tally of 1.703 million vehicles in 2002 was propelled by a surge in luxury sales, a strong rebound from 2011 levels by Japan-based auto makers, and continued growth at South Korea-based Kia Canada Inc. and Hyundai Auto Canada Corp.
"Auto sales outperformed the rest of the economy massively in Canada in 2012," said Douglas Porter, Bank of Montreal's deputy chief economist.
Low borrowing costs and the stretching out of car-loan terms underpinned the 6-per-cent sales increase, Mr. Porter said, noting that low interest rates are critical in purchases of big-ticket items "of which autos are pretty much Exhibit A."
The strong loonie also helped by restraining prices, he said. "Over the past decade, new auto prices have dropped an average of 1 per cent per year, while the overall consumer price index has risen by nearly 2 per cent a year."
He's forecasting a 1-per-cent decline in 2013, but industry analyst Dennis DesRosiers is slightly more bullish.
"The Canadian market still hasn't reached its potential, so we believe that 2013 should see increased light vehicle sales and we could surpass our previous record," said Mr. DesRosiers, president of DesRosiers Automotive Consultants Inc. of Richmond Hill, Ont. An increase of just 2 per cent would be enough for a record and pent-up demand or fundamental growth should suffice, he said.
Ford Motor Co. of Canada Ltd. grabbed top spot for the third straight year. Chrysler Canada Inc. posted its best results since 2002 to jump into second place ahead of General Motors of Canada Ltd., which was the sales champion for decades before Ford toppled it in 2010.
Ford's sales were flat, while Chrysler's rose 6 per cent. GM's sales fell 6 per cent, pushing its market share down to 13.5 per cent, which is believed to be the lowest in a century.
Sales for Japan-based auto makers surged 12 per cent, a strong rebound from 2011 when sales slumped after an earthquake and tsunami led to several months of vehicle shortages. Those results are still well off the peak sales year of 2008 for Japanese auto makers when they sold 615,914 cars and trucks and grabbed 37 per cent of the market. Their sales of 550,824 last year represented about 33 per cent of over all Canadian deliveries in 2012.
Among luxury auto makers, Porsche Canada notched the biggest sales gain while other Germany-based companies also outperformed the overall market with Audi Canada, BMW Canada Inc. and Mercedes-Benz Canada Inc. setting sales records.
Several other auto makers also set individual records in 2012. Among those reporting record annual sales were Porsche, Hyundai Auto Canada Corp., Kia Canada Inc., Subaru Canada Inc. and Volkswagen Canada Inc.
Strong pent-up demand propelled the U.S. market to its highest level since 2007, before the recession sent the industry into crisis.
Since U.S. sales hit a trough in 2009, they have rebounded by 4 million units, or 40 per cent, over three years, Ellen Hughes-Cromwick, chief economist of Ford Motor Co., said Thursday.
"This represents significant sales growth and is typically not seen when an economy is growing in the 2-per-cent range," Ms. Hughes-Cromwick told reporters and analysts during a conference call.
She's calling for the U.S. recovery to continue in 2013 and sales to surpass 15 million units, as are analysts, economists and other auto makers.
"What we're seeing is a very steady improvement that sort of is paralleling the improvement in the underlying economy," Mustafa Mohatarem, chief economist of General Motors Co., said during that company's year-end sales call. "Getting away from the boom-and-bust cycle is really important. Steady growth is what we're hoping for and that's what looks likely to happen at this point."