Canadian car sales keep dropping, but analysts see a bottom

Canadian sales of cars and trucks plunged in May as turmoil within the sector hurt consumer confidence, according to statistics released Tuesday.

Last year saw the sector report high overall sales, which explains some of the large percentage drop between May 2008 and May 2009. But seasonal factors preclude a meaningful comparison between April and May.

Still, some analysts believe the sector's free-fall, which started even prior to the credit crunch, might finally be over.

Sales of light vehicles in this country dropped by 16.5 per cent for May compared with the same month one year earlier.

Domestic car companies sold 154,018 cars and light trucks in the fifth month of the year. That represented a reduction of more than 25,000 vehicles sold versus May of 2008.

The various producers managed to move 83,181 cars and 70,837 trucks off their lots in the month. Thus, cars represented 54 per cent of the sales total compared with 59 per cent a year earlier.

But when you only count the domestic manufacturers — Ford Canada, Chrysler Canada and GM Canada — the tumble was worse at 23 per cent.

The former "Big Three" automakers constituted 43.5 per cent of May's total sales, versus 47 per cent in May 2008.

Big losers (May)Sales growth (%)Smart -59.5 Saab -57.8 Chrysler-50.0 Source: Company reports

Chrysler was the biggest loser among the larger sellers, enduring a drop of 50 per cent in sales in May. The company, which slipped into a formal reorganization process earlier this year, flogged only 13,593 vehicles compared with the same month one year earlier.

Light in a dark tunnel

Still, at least one car watcher saw good decent news in these weak numbers.

Dennis DesRosiers, the well-considered sector analyst, said extrapolated figures for the full year show a sales picture not as bleak as others had predicted.

Big winners (May)Sales growth (%)Audi29.3 Kia 25.5 Hyundai 17.8 Source: Company reports

"This is not good but when you translate these sales numbers into a seasonally adjusted annual rates the data shows a stabilization of sales in Canada at about 1.45 million units. Most … analysts have a 1.35 million annual rate in their forecast so the Canadian market appears to be stabilizing at about a 100K units above internal forecasts," DesRosiers said.

As well, the relatively small drop in light truck sales — 5.6 per cent — could indicate the fleet side of the business will be stronger than expected for the rest of the year, he said.

In addition, most manufacturers were selling from existing inventory, not new production, a sign that they might need more assembled cars and trucks by the fall, DesRosiers said.

In fact, Ford's North American parent said already it planned to boost production by 10,000 in the second three months of the year and looked to make 460,000 vehicles in the July-to-September period, up 42,000 compared with the production levels for the third quarter in 2008.