Automotive News Canada - August 2023 - 14

14
* AUGUST 2023
Industry savours a life of luxury
Two factors for strong
sales: Increased vehicle
selection and baby
boomers who
are flush with cash
By DAVID KENNEDY
T ORONTO BUREAU CHIEF
GROWTH IN CANADA'S LUXURYvehicle
segment shows no sign of abating,
as consumers continue to flock to them
despite higher interest rates and persistent
inflation.
Once a " very, very small " portion of
Canadian vehicle sales, the luxury market
has been " growing consistently " over
the past 20 years, said Andrew King, managing
partner at DesRosiers Automotive
Consultants Inc.
In the first half of 2023, luxury sales
The original Northwest Lexus location
opened in 2001 and was predicted to
sell about 300 cars a year. It's now selling
more than 1,000 a year, the group said,
and the replacement location will be sized
accordingly, with three times the floor
space.
Hutchinson: Interest rates aren't
hurting Lexus sales, and " fundamental
economics are obviously strong. "
FILE PHOTO
accounted for 12.9 per cent of total vehicle
sales in Canada, up from 12.5 per cent
in 2022 and 11.9 per cent in pre-pandemic
2019.
A range of long- and short-term factors
are feeding the gains, King said.
" The 20-year growth has been driven
by a lot by demographics. There's a
huge number of baby boomers in Canada
who are now in their peak luxury-buying
years, and that's been a very strong factor. "
Lexus
vehicles accounted for 15.1 per
cent of Toyota Canada's sales through
the first half of 2023, compared with
11.6 per cent of total sales for 2022. The
16,243 vehicles sold through June was
a new high for Lexus (NX 350h shown).
PHOTO: LEXUS
King also credits increased vehicle
selection as key to the broader appeal of
the high-end market.
In an indication of how far luxury sales
have come over the past two decades, the
Brampton, Ont.,-based Policaro Group
broke ground July 14 on a new Lexus
dealership to replace a nearby store that
had outgrown its footprint.
Group CEO Francesco
Policaro expects the luxury
segment to continue gaining
ground. He also expects
Canada's high levels of
immigration - leading to
the arrival of more skilled,
well-paid new residents -
to translate into higher luxury
sales.
STABLE GROWTH
cent and 10.2 per cent of total sales in 2022
and 2019, respectively.
LUXURY'S BIGGER
SLICE OF THE PIE
July Lexus sales of 2,647 vehicles were
up 20.4 per cent over the 2,199 vehicles
sold the same month a year ago.
While vehicle production has improved
over the past six months,
demand continues to outpace
supply, Hutchinson
said. That means Lexus
dealerships are still
seeing a lot of pent-up
demand.
The luxury segment's
share of total new-vehicle
sales in Canada
Toyota Canada Inc. and
its Lexus unit are also
forecasting growth across
Canada, though not necessarily
a sales boom.
" It looks very stable.
Population growth is
strong, [and] fundamental
economics are obviously
strong, " said Toyota
Canada CEO Larry Hutchinson.
Lexus sold 16,243 vehicles in Canada
in the first six months of 2023, a new high
for the brand. That compares with 12,115
sold over the same period last year and
12,321 during the first half of 2019, before
the pandemic and resulting supply chain
problems crimped vehicle output.
Lexus accounted for 15.1 per cent of
Toyota Canada's total sales through the
first half of 2023, compared with 11.6 per
* 2023 (first half): 12.9%
* 2022: 12.5%
* 2021: 12.2%
* 2020: 11.4%
* 2019: 11.9%
Source: DesRosiers Automotive
Consultants Inc.
As with Policaro,
Hutchinson said Lexus
has not seen any indication
that buyers are leaving
the luxury market
because of higher interest
rates. On July 12, the
Bank of Canada raised its
benchmark rate to five
per cent, its highest level
in more than 20 years.
Eventually, King said,
the higher interest rates
will " bite " the luxury
market, but the shortterm
outlook for the segment
is " certainly " positive.
Coupled with the long-term demographic
trends fueling luxury sales, King
said, the top half of Canadian earners
have been putting away large sums of
cash since the start of the pandemic and
are finding new ways to dispense it.
" There's a lot of money there, " he said,
" and you see them spending it on travel,
obviously, and on restaurants and on luxury
vehicles. " - ANC
The Policaro Group's new Northwest Lexus store will have triple the floor space of its current store,
which was built in 2001 to sell about 300 cars a year. Today, it sells more than 1,000 a year, the group said.
SUPPLIED RENDERING
Policaro relocates Acura, Lexus to bigger homes
More floor space
is needed to keep
pace with increased
customer demand
By DAVID KENNEDY
T ORONTO BUREAU CHIEF
THE POLICARO GROUP
broke ground in July on new
locations for two luxury dealerships
in Brampton, Ont.
Northwest Lexus and
Policaro Acura sit next to each
other in eastern Brampton, but
both will move to a fast-growing
auto mall at the city's north end
where a series of luxury dealerships
are located.
" Given the competitive
brands that are in the area,
this is where the customers are
going to be and where
we feel luxury retail
will be - not just for
Brampton - but we
feel this is a destination, "
said Francesco
Policaro, CEO of the
dealership group, which
owns seven new-vehicle
stores in the Greater
Toronto Area.
Brampton is 45 kilometres
west of downtown
Toronto.
Policaro:
The two
Policaro already has
a BMW store at the
emerging auto mall,
at Highway 410 and
Mayfield Road. Other
nearby luxury brands include
Audi, Genesis, Jaguar Land
Rover, Mercedes-Benz and
Tesla.
The relocation of the two
dealerships was mainly about
adding floor space to
keep up with customer
demand, Francesco
Policaro said. The group
put ceremonial shovels
in the ground at
the 35,000-square-foot
(3,200-square-metre)
Acura site July 13, followed
by the Lexus location
the next day.
dealerships
are moving
to a new auto
mall because
" we feel this is
a destination. "
FILE PHOTO
Northwest Lexus will
triple in size to about
60,000 square feet (5,500
square metres) from
20,000 square feet (1,800
square metres). The
new location will have a
13-car showroom and a
19-bay service department.
The current Northwest Lexus
location opened in 2001 and was
expected to sell about 300 cars a
year. It's now selling more than
1,000 vehicles a year, relying on
an adjacent facility to keep pace
with service business.
HIGHER CONSTRUCTION COSTS
Policaro has seen luxury
sales surge since the beginning
of the COVID-19 pandemic
and they're expected to remain
strong even with higher interest
rates, Francesco Policaro said.
On July 12, the Bank of Canada
raised its benchmark rate to
five per cent, its highest level in
more than 20 years.
" Sales have maintained the
same pace that they have since
the pandemic began, " he said,
" and we're seeing a rise [in business]
on the aftersales side. "
Lexus sold 8,993 vehicles in
the second quarter, a new high
for a single quarter. Acura sales
also rose, but were far below
past highs. The brand sold 3,098
vehicles in Canada in the second
quarter, up from 2,409
during the same period of 2022,
but well short of the 4,523 vehicles
it sold in the second quarter
of 2021.
With a strong growth outlook
for the luxury segment, Policaro
said, the group has no qualms
about making the major investments
in north Brampton.
The company's construction
budgets have not been finalized,
he said, but building costs
will be significantly higher than
before the pandemic. Dealership
construction was about $250 per
square foot before 2020, he said,
compared with about $450 today.
Based on square footage,
construction costs for the new
Northwest Lexus dealership
would run about $27 million,
and Policaro Acura would run
about $15.8 million, not including
the value of the land. - ANC

Automotive News Canada - August 2023

Table of Contents for the Digital Edition of Automotive News Canada - August 2023

Automotive News Canada - August 2023 - Intro
Automotive News Canada - August 2023 - 1
Automotive News Canada - August 2023 - 2
Automotive News Canada - August 2023 - 3
Automotive News Canada - August 2023 - 4
Automotive News Canada - August 2023 - 5
Automotive News Canada - August 2023 - 6
Automotive News Canada - August 2023 - 7
Automotive News Canada - August 2023 - 8
Automotive News Canada - August 2023 - 9
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Automotive News Canada - August 2023 - 11
Automotive News Canada - August 2023 - 12
Automotive News Canada - August 2023 - 13
Automotive News Canada - August 2023 - 14
Automotive News Canada - August 2023 - 15
Automotive News Canada - August 2023 - 16
Automotive News Canada - August 2023 - 17
Automotive News Canada - August 2023 - 18
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Automotive News Canada - August 2023 - 20
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Automotive News Canada - August 2023 - 31
Automotive News Canada - August 2023 - 32
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