Weakness in Canadian auto sale numbers was already evident in March, where volumes slumped by 47 per cent month-on-month – the single greatest monthly decline ever recorded, said a new report released Wednesday by TD Economics.

“What’s perhaps more surprising than the magnitude of the decline, is how fast it occurred. Through the first few weeks of March, volumes were tracking a relatively “normal” pace of sales for the month. However, with all provinces enforcing various social distancing measures by mid-month, sales completely collapsed through the second half of March,” said the report.

“This stall in sales will almost certainly continue through all of April and likely into next month, as continued efforts to contain the spread of COVID-19 have led to the closure of all non-essential businesses across the entire country, including front-end dealerships. While most dealerships have shifted to having a stronger online presence, it seems unlikely that online purchases will provide a meaningful offset over the coming months. 

“Given both the magnitude of the shock and current level of uncertainty, consumers are likely to forgo near-term purchases and wait until better economic conditions prevail. We expect the extreme disruptions in economic activity to persist into mid-May, before we start to see a gradual return to economic activity. Gradual is the key word. Despite the duration of the shock expected to be just several months, it is assumed that it will take two-years to recover all the lost economy-wide output. 

The report said Alberta, Saskatchewan and Newfoundland will be slower to recover given the recent collapse in oil prices.

“In fact, we have already seen many oil producers having slashed capital spending plans, and in some cases, stopped production altogether. The effects of this will be felt at the household level through this year and next. Employment growth across all three provinces will likely be slower than the national figure, ultimately weighing on household incomes. During this time, vehicle sales are also expected to underperform, just as they did during the last oil shock several years ago,” said TD.