Oil’s plunge could mean bumpy ride for auto sales in Alberta

A Hummer sits at a Calgary dealership. CP PHOTO/Jeff McIntosh

The halving of oil prices in recent months is paving the way for a bumpy ride in high-end auto sales in Alberta, the head of the largest dealership network in the country said Friday.

Tom Orysiuk, chief executive of AutoCanada Inc. said luxury vehicle sales in Calgary will likely take a hit as oil execs see bonuses axed and other income diminished. The national dealership network of 48 lots holds Alberta as its biggest market with a count of 22 in the oil-rich province.

“The Calgary car market might be a little tough on the luxury side,” Orysiuk told a conference run by CIBC.

MORE: Plunging oil — complete coverage 

Orysiuk is less concerned about vehicle sales among middle- to working-class buyers, noting that AutoCanada also has dealerships in Albertan towns not as directly exposed to the energy industry as centres like Calgary and Edmonton. Folks in those smaller centres are expected to continue to show strong demand for trucks and other vehicles as gas prices head lower.

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Humming sales

Auto sales in the province have hummed along even as oil prices have tanked. Sales data for last month show a 4.4 per cent rise compared to December 2013, following on a stronger than expected showing of 4.8 per cent in November.

“So much for lower oil prices cratering the new vehicle market in Canada’s oil-rich provinces,” Dennis DesRosiers, auto industry analyst and president of DesRosiers Automotive Consultants Inc. said in a recent research note.

Rate cut helps

Orysiuk said the bank of Canada’s decision this week to slash its trend-setting interest rate a quarter of a percentage point to 0.75 per cent is going to help the car-selling business. “We see [customer] access to credit as very strong,” the dealership exec said.

MORE: Rate cut isn’t a green light for consumers to borrow more, experts say

Like other dealership owners across the country, AutoCanada has enjoyed a record boom in sales over the last two years. Whether that sales momentum can be sustained as oil prices remain low and begin to spill over into other economic activity, remains to be seen.

As a hedge against a possible slowdown in AutoCanada’s most important market, Orysiuk said the dealership network is looking at buying other dealers in provinces like British Columbia and Ontario. “We’re looking at expanding in places outside of Alberta,” he said.

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In a separate research report last month, analysts at RBC Capital Markets noted while there isn’t a direct link between auto sales and falling oil prices, there are clear ties.

“Auto sales are tied more to employment levels and consumer confidence than they are to the price of crude,” the RBC analysts said. “These factors are obviously linked in Alberta.”

Added Orysiuk, “This is going to be a very interesting year in terms of the price of oil.”

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