Map courtesy of Canadian Automotive Fleet

Map courtesy of Canadian Automotive Fleet

Automotive retail sales in Canada hit a record of 1.94 million new vehicles (fleet and retail) sold in calendar-year 2015, an increase of 2.6% over 2014. This is the third consecutive year of record retail sales in Canada.

Although the commercial fleet business is mature in Canada, fleet sales showed growth in calendar-year 2015, growing 2.8% over 2014-CY.

The daily rental and government segments of the Canadian fleet industry recorded more growth than commercial sales in 2015. For instance, government spending is increasing as Prime Minister Justin Trudeau is following through with his plan to invest in infrastructure to stimulate the economy, which is positively impacting government fleet sales.

Canada is primarily a service-based economy, largely driven by small local businesses. As in the U.S., the small fleet segment is the growth engine for fleet sales. For instance, the small business fleet segment in Canada experienced double-digit sales growth in 2015, which was up 18% year-over-year.

“In Canada, it is really the small local businesses that drive our economy. Actually, as the old saying goes up here, ‘over 80% of the commercial customers buy fewer than 30 units per year.’ It is important to truly connect with customers at the local level with a commercially focused dealer network,” said Peter Bagnall, director - fleet and commercial sales for General Motors of Canada.

GM Canada has the largest dealer network in the country with 453 dealers, of which, 125 are Business Elite dealers, who focus on serving the fleet needs of small businesses and the local economy. Every Business Elite service department is required to have the facilities, tools, equipment and certified technicians to accommodate business customer’s specific needs, including: priority service, round-the-clock towing, work-ready loaner vehicles, and business financing and leasing options.

Diverse Fleet Market

As the second largest country in the world in terms of land mass, Canada’s fleet market is as diverse as its geography, and it is regional in nature. There is not a single fleet market in Canada, with market dynamics varying by region and industrial sector.
It is difficult to identify the average fleet size in Canada. “I have seen figures range anywhere from 35 up to 70 units, but, at the end of the day, the average very much depends on what your definition of ‘fleet’ means. Some OEMs have tied a fleet designation to a business number in Canada, and inclusion of these registrations drops the average dramatically,” said Bagnall.

The strongest vocational segments for commercial fleet sales in Canada are energy and construction. However, with the global oversupply and decreased price of oil, companies in the Canadian energy sector have implemented deep spending reductions. Senior management at oil companies are placing intense pressure on fleet managers to control acquisition and operating expenses.

However, cost containment pressures run throughout the Canadian fleet market. One way Canadian fleets have been looking to reduce acquisition and operating costs is by downsizing to a smaller truck segment.

“We see some customers moving from ¾-ton trucks to ½-tons in an effort to save on acquisition cost and improve fuel efficiencies,” said Bagnall.

Although there is a shift in types of vehicles acquired by fleets, Bagnall stressed that pickup truck sales in Canada continue to be strong.

“I want to be clear that large pickups continue to represent more than 40% of the Canadian commercial market and Western Canada is our biggest truck market,” said Bagnall. “We also see the mid-pickup market growing, which is great for GM Canada, as the Chevrolet Colorado and GMC Canyon now own close to 50% of the Canadian commercial market in mid-pickups. GM is also the sales leader of HD pickups – ¾ and 1-ton – capturing 54% of the market with Silverado and Sierra.”

Bagnall said GM’s ability to serve different truck segments is a result of its three-truck strategy.

The economic slowdown in the oil-rich provinces of Alberta and Saskatchewan has been somewhat offset by growth in other provinces, such as British Columbia, Ontario, and Quebec.

Canada is a net export nation with 75% of its exports going to the U.S., its largest trading partner. One factor strongly influencing the commercial fleet market is the foreign exchange rate of the Canadian dollar, which has declined against the U.S. dollar. This has positively impacted the Canadian economy, particularly provinces such as Ontario and Quebec, which have a strong manufacturing sector. The weaker Canadian dollar makes their exports less expensive in the U.S.

Despite the lower fuel prices, the demand for green, low-emission vehicles will continue to grow, driven by the Canadian federal government. It is expected that there will be a growing trend for businesses and municipalities in certain parts of Canada to adopt green technologies.

In terms of vehicle depreciation trends, a 2%-per-month depreciation reserve is used by most fleets in Canada.

Datat courtesy of Canadian Automotive Fleet

Datat courtesy of Canadian Automotive Fleet

Canadian Economic Forecast

Historically, overall fleet sales in Canada have always been tied to the robustness of the national economy. Overall improvements in sectors such as housing, construction, and infrastructure assisted in modestly growing overall fleet sales. Construction is playing a bigger role in the economic activity Canada is experiencing in Ontario and Quebec, which has stimulated commercial fleet sales. There also continues to be stable household spending, ongoing demand for housing, and gains in employment, all of which are positive signs for Canada’s economy. Also helping the Canadian economy is the ongoing growth in the U.S. market and the weaker Canadian dollar, which is boosting U.S. demand for Canadian exports.

In addition, GM is expanding its business footprint in Canada with several new initiatives.

First, GM Canada announced it would establish a separate Canadian headquarters office for its Cadillac brand in a new complex in downtown Toronto. This move parallels an earlier decision by General Motors to establish a separate headquarters office in the U.S. for its Cadillac brand in New York City.

In another recent development, GM Canada purchased another site in Toronto to serve as the Canadian headquarters for its Maven car-sharing service. The new site will be called the Toronto GM Mobility Campus. The Maven car-sharing business partners with condo developers to offer a fleet of GM vehicles to condo buyers, who pay for the service through their condo homeowners association fees. A similar pilot project is currently underway in New York City.

Editor's note: This article first appeared online in the Q1 - Q2 Global Fleet Market Conditions supplement magazine June 2016.