Car sales expected to drop 16% across Canada

British Columbia and Alberta are on track to post huge drops in car sales for the first two months of 2009 with Canada expected to see auto purchases fall by 16 per cent for the entire year, according to a new report released Monday.

In its most recent forecast, Scotiabank Economics said the country's two most western provinces have experienced a sales slippage in the double-digit range for the January and February period, including more than 30 per cent in British Columbia compared to its 2007 record level.

Scotiabank's auto expert Carlos Gomes predicts that Canadians will buy 1.38 million cars and trucks in 2009, a substantial tumble versus 2008's level of 1.64 million.

"We have reduced our 2009 Canadian sales forecast as the weakness has intensified alongside a sharp reversal in purchases in British Columbia and Alberta," Gomes wrote.

Slower construction activity and a crumbling forest sector have hurt B.C.'s economic prospects, while the take-home incomes of Albertans have been crimped by a prolonged slump in world crude oil prices, he said.

 Across Canada and the United States, auto sales have crashed as unemployment in both countries has risen while available credit for consumers has shrunk, experts said.

Still, prospects for a recovery, while tenuous, are better in Canada than in the United States, said the Canadian Automobile Dealers Association.

For one thing, Canada's economic growth rate for 2009 looks to be more robust than that of its American neighbour, said Michael Hatch, chief economist for the group which represents 3,500 car dealers across the country.

BMO Economics, for instance, has estimated that Canada's gross domestic product will shrink by 2.4 per cent, actually half a point better than the expected U.S. performance, where the national economy is expected to contract by 2.9 per cent for the year.

In addition, American consumers are essentially tapped out in terms of consumers without vehicles, Hatch said.

He noted that, at 101 per cent ownership, every American that can drive already owns a car or truck. In Canada, the percentage of vehicle owners, at 75 per cent, still gives the Canadian automotive sector some room to grow, Hatch said.

"[American sales] have really fallen off a cliff. We're in a slightly better position up here in Canada," Hatch said.

Interestingly, at 1.6 million, 2008 was Canada's third best year on record for auto sales, he said.

The car dealers' association does not post its own sales forecast. But, a drop of 10 per cent "would not be unreasonable," Hatch said.