According to Statistics Canada, the number of new motor vehicles sold in Canada saw a 4.9% increase in the first half of the year despite trade tensions and heightened uncertainty. Alberta experienced a significant 11.1% rise.

Pent-up demand following supply chain challenges from the aftermath of COVID and strong population growth are contributing to this year’s uptick. Consumers also appear to be front-loading their purchases ahead of tariffs, which helps explain the jump observed in the spring.

However, the positive trend has begun to recede. After reaching an eight-year peak in April, seasonally-adjusted new vehicle sales have consistently declined in subsequent months.

The automotive sector is grappling with significant challenges stemming from U.S. tariffs. The Trump Administration's 25% tariff on Canadian automobile imports, with an exemption for U.S. content, was met with a reciprocal tariff from Canada on non-CUSMA compliant U.S. automobile imports. Furthermore, the sector is now subject to a 50% tariff on steel and aluminum exports, impacting critical components like automotive exhaust systems and electrical steel for electric vehicles.

Interestingly, average new vehicle prices in Canada have only increased by 1.9% year-to-date over the first six months, which may be counterintuitive given the tariffs. However, the Consumer Price Index survey (which tracks similar types of vehicles over time) reveals a 4.5% year-over-year jump in the average prices of all passenger vehicles, including used cars, in July.

Why has the price impact been so muted? Recent reports suggest that a year-over-year increase in July sales can likely be attributed to dealerships liquidating their pre-tariff inventory. Other possibilities include manufacturers absorbing costs by reducing their profit margins or strategically navigating tariff exemptions to maintain consumer interest.

Sales momentum is projected to dissipate in the coming months as front-loading effects diminish and automakers exhaust alternatives to passing costs on to consumers. Concerns are mounting within the auto sector regarding potential job losses and production cuts, stemming from the interaction of U.S. tariffs and Canadian countermeasures. Consequently, real consumer spending in Alberta, particularly on durable goods like motor vehicles, is anticipated to remain subdued throughout the remainder of the year.

Answer to the previous trivia question: Cu is the symbol for copper on the periodic table of elements.

Today’s trivia question: What country produces the most copper?