Surinder Singh spent Valentine's Day last month doing everything he could to impress his wife - from buying her flowers on his way home from work to cooking a special romantic dinner.
But his mind was clearly on another love interest as well.
The next day, Singh joined thousands of other Ontario residents at the Canadian International Auto Show in downtown Toronto checking out the sleek curves on a new Porsche and casting loving glances at a Lamborghini.
"He just loves cars; I've learned to accept it," laughed his wife Emma. "Right now we're shopping around for a new car, so we came together this year to see what's new. I'm not sure, though. There's nothing I've really fallen in love with so far."
After months of declining sales, manufacturers in Canada's troubled auto sector are aggressively trying to woo buyers back into vehicle showrooms. But the market has had more sharp turns than British Columbia's Coquihalla Highway.
Manufacturing sales last December dropped 3.4 per cent to $48.6 billion despite analysts' earlier predictions of a two-per-cent slide. Carmakers also put the brakes on their production efforts, cutting back about 25 per cent to $3.8 billion compared with the month before, according to Statistics Canada.
Executives at the Ford Motor Company of Canada Ltd. were putting their hopes in several new models of vehicles and the new Sync technology, which is described as a fully integrated, voice-activated entertainment system. To make a cellphone call, you simply push a button on the steering wheel and say the telephone number or person's name.
You can also say the words "rock music" or "soft jazz" or the name of a particular artist and the car will search through your iPod or digital music player to find what you want.
Ford also announced a new social media website late last month where customers could share their views on the company and its vehicles.
Staff would carefully screen posts to www.fordpoweredbyyou.ca and pass feedback along to senior executives.
Ford's vice-president of general marketing David Greenberg acknowledged that asking for feedback could open up a Pandora's Box of complaints from consumers. "Polarization is a good thing though because we want to know what our customers are thinking, good or bad. This is not a one-way relationship. We want to open up a dialogue to help us reflect consumer needs and move forward as a company," he said in a telephone interview from the company's Oakville head office.
Dennis DesRosiers, president of DesRosiers Automotive Consultants Inc., said: "This business is extremely competitive. There are 3,455 dealers out there in Canada selling 30 different brands right now. It's like being inside a shark tank."
DesRosiers said auto dealers have been changing tactics lately, concentrating on increasing profits more than revenue. The share of revenue for new-car dealers has gone from 48.2 per cent of the market in 2000 to 44.4 per cent in 2007. Total gross profit margins, however, went from 17.4 per cent of revenue to 18.7 per cent over the same period.
"Increased quality, longer-lasting vehicles and increasing competition in (the) new-vehicle side of a dealership forces more attention to be put on the entire 'value chain,' " such as financing and repairs, DesRosiers explained during a recent presentation to dealers. But access to a large part of that value chain depends on new-vehicle sales, like selling a low-cost razor to make better margins on selling blades later on.
Automotive dealers are also dealing with technology issues, succession planning and dealer groups, he said.
The new-vehicle market has been slowly moving toward more entry-level vehicles with a lower manufacturer's suggested retail price, making profit margins even smaller, DesRosiers said.
In a note to clients later, he added vehicle prices fell more than two per cent in Canada last year to the most affordable level since 1991. Overall prices eased slightly to an average of $31,879 last year, down from $32,609 in 2006. "So relative to before-tax income, Canadians paid almost the same for a new vehicle in 2007 as they did in 1991," he wrote.
Manufacturers appeared to be caught by surprise last year when the Canadian dollar went up, exposing a price gap between some U.S. and Canadian vehicles. That forced Canadian automakers to respond with rebates, subsidized leases and price cuts. Volkswagen Group Canada Inc. and Toyota Canada Inc. announced discounts earlier this year to formalize their pricing strategy.
Asked during an interview with Business Edge what he predicted for the auto sector this year, DesRosiers said: "We are reasonably pessimistic, but I don't see any sort of a freefall or anything. The market is still healthy by historical standards."
Huw Williams, an Ottawa-based spokesman for the Canadian Association of Auto Dealers (CADA), said times are tough in most dealerships across the country. "The overall numbers are declining over what they have been in the past. It's clearly a competitive industry," he said. "I'm not suggesting any sympathy cards quite yet, but it's not easy."
Williams said one of the biggest issues on the horizon for dealers is tougher new emission-control standards originally proposed by the State of California. There have been concerns that some North American vehicle models would not meet the emission-control guidelines. If passed by any Canadian provinces, dealerships would not be able to sell that vehicle in the province, which could prompt more cross-border shopping.
The California state law on tailpipe emissions was originally drafted in 2002, according to a San Francisco Chronicle story published Dec. 13 last year. But state legislators need a waiver from the Environmental Protection Agency (EPA) to exceed federal clear-air requirements starting with 2009 models.
Back in Canada, the federal government appeared to be extending a helping hand to the auto industry when Finance Minister Jim Flaherty tabled his budget late last month. Flaherty announced the creation of a $250-million automotive innovation fund, which would provide money over the next five years to support large-scale research-and-development projects, especially the development of more fuel-efficient vehicles.
Flaherty is MP for Oshawa-Whitby, which is also home of a large General Motors plant.
Industry observers were surprised, however, that the Conservatives announced they would no longer be offering rebates in their controversial ecoAuto program by the end of this year. The rebates ranged from $1,000 to $2,000 on eligible 2006, 2007 and 2008 model cars.
(David Hatton can be reached at hatton@businessedge.ca)
