Canada is a remarkable country in many respects. It is the largest country in the world that borders one country, the United States of America, and it is slightly larger than its southern neighbour. In fact it is the second largest country in the world after Russia and has between two and three million lakes, more than all other countries in the world combined, according to the US Central Intelligence Agency.

Large parts of the country in the north are in the arctic regions and it is not surprising that the majority of the population, numbering almost 35 million are located in the south of the country. The inhospitable regions in the north also help to explain the large land mass yet relatively small population. That population is relatively young too with 41% between the ages of 25 and 54, forming by far the largest age group.

Canada is an energy-rich nation. According to the CIA, the country has the third largest oil reserves in the world, after Saudi Arabia and Venezuela. Crude oil, natural gas and electricity are among the country’s leading exports. Considering electricity production, just 31.7% of it is produced from fossil fuel sources, according to CIA data. This shows that 54.7% is produced from hydroelectric sources, 9.2% from nuclear fuels and 4.2% from other renewable sources. In theory at least, Canada ought to be a good place to drive an electric car.

Unpaved roads dominate

Canada is a vast country and according to the CIA data, 60% of roads in Canada are unpaved. In addition, heavy snowfall is experienced in the northern parts of the country and in some parts there is permafrost. This explains the popularity of the pickup truck and SUV sectors. 2014 was a record year for vehicle sales in Canada, with approximately 1,851,000 new light vehicle sales during the year. This total breaks down into around 761,000 new cars and 1,090,000 light trucks. Canada is home to a large motor manufacturing sector, with 14 manufacturing plants, all based in the province of Ontario. Fiat Chrysler, Ford, General Motors, Honda and Toyota all produce vehicles here. Given the strong presence of the Detroit ‘Big Three’ and Canada’s strong light truck market, it is hardly surprising that it is those companies that dominate the motor vehicle sector.

Canada is the ninth largest vehicle producer in the world, and according to the Canadian Vehicle Manufacturer’s Association, the sector is Canada’s biggest contributor to manufacturing GDP and the country’s largest manufacturing employer.

Scotiabank expects that the record sales in 2014 will increase again in 2015, “We expect sales to
edge up to 1.86 million units in 2015, buoyed by ongoing job
gains, low interest rates, as well as near-record vehicle affordability. However, in contrast to last year when purchases advanced in all regions, the outlook is diverging across provinces. Central Canada will become the growth engine that will drive purchases to record highs.”

Ontario and Quebec – focus for growth

Scotiabank offers a breakdown of sales by province. Given the industrial concentration in Ontario and with it a large proportion of the population, it is not surprising that the province is the largest light vehicle market in Canada. In 2014, sales rose by 11%, exceeding 700,000 for the first time on record. The bank expects this figure to climb to 726,000 in 2015 with both retail and fleet sales increasing. “In particular, fleet activity was buoyed by a double-digit gain in corporate profits in Ontario last year, and will be supported in 2015 by accelerating export growth,” says Carlos Gomes in the Scotiabank February 2015 Global Auto Report. The report expects to see sales gains in Quebec with marginal gains in British Columbia. In other provinces, the report suggests that sales will either remain flat or decline slightly.

Looking at the breakdown in car and truck sales, Scotiabank expects a similar pattern to 2014. In the car sector, Japanese manufacturers dominate with an expected 43.7% of sales in 2015. Toyota is forecast to take the largest slice with a 14.3% market share, up from 12.5% in 2014, followed by Honda with 11.5%, down from 12.5% in 2014. Hyundai is expected to take a 13.2% slice of the market, up from 11.9% last year, with gains also expected for Volkswagen, up from 7.9% last year to 9.4% in 2015.

Both Ford and Chrysler are expected to lose market share in 2015, down from 7.6% to 5.7% and from 7.3% to 5.0% respectively.

Light trucks LEAD sales

The Big Three dominate the light truck market in Canada, taking around 57% of the market. Shares for the individual manufacturers are expected to stay around the same levels with Chrysler taking around 24.5% of the 2015 market, Ford 18.9% and

General Motors 13.2%. Toyota takes the largest share among Japanese manufacturers with an expected 9.8% of the truck market in 2014. Hyundai’s share is expected to slip back from 3.9% in 2014 to around 3.4% in 2015, while Kia is expected to make a marginal gain from 2.1% in 2014 to 2.5% in 2015.

Slow EV growth

Canada presents a mixed picture for electric vehicles and hybrids. On the one hand, the abundance of renewable electricity is a real encouragement to EV and plug-in hybrid take-up. Set against that are the large distances that are involved and the sub-zero weather conditions in the north of the country. Neither favours EV use.

Just the same, there are a number of EVs and plug-in hybrids that are either arriving now or will be arriving in the country this year. Models with fleet appeal include the Kia Soul EV, which is currently offering a range of around 160km, so perhaps attractive to some Canadian users. The revised Chevrolet Volt was launched at the Detroit Show in January and is due in Canada by the end of the year. Nissan has boosted supply of the LEAF in Canada, which should raise sales of the car. The latest Smart ForTwo ED should arrive in Canada this year with a $26,990 (Canada) starting price making it the cheapest electric car on the Canadian market. Tesla has installed three Supercharger stations in Canada at Squamish, British Columbia, Toronto and Cornwall, Ontario and more are expected. Tesla’s new Model X SUV is due to start production too. Last but not least, the Cadillac ELR uses the Volt powertrain, but in a two-door coupe body. US EPA range is rated at 59km under electric power. There are purchase incentives for EVs and plug-in hybrids in Canada, such as the $8,500 (Canada) offer in Ontario or $8,000 (Canada) in Quebec.

As we have seen, Scotiabank expects the fleet sector to do well this year. Scott Singsank is senior global account manager at Wheels Inc, one of the leading North American fleet service providers, active in Canada. Data for 2014 was not yet available as we went to press but the total commercial fleet market in Canada was around 316,000 vehicles in 2013. “That includes commercial fleets, rental and governmental fleets,” explains Singsank, representing around 18.5% of the light vehicle market. Of the 316,000, around 195,000 vehicles were light trucks, which includes pickup trucks, SUVs and minivans, or MPVs. “There are a lot more SUVs than you would find elsewhere,” comments Singsank, “With our client base we do see a lot of what we would consider to be small SUVs, such as the Ford Escape, the Chevy Equinox and Jeep Cherokee. These are probably the top vehicles at this point.”

EVs are not really a factor in the Canadian fleet sector at the moment, partly for reasons already discussed, as well as comparatively low oil prices in Canada. As Singsank suggests, “The use of electrics in our client base is non-existent and hybrid is relatively non-existent. We have had some clients that have put hybrids on their selector and they just don’t get chosen as much by the drivers as everything else. Then electrics, it’s just like in the US, there’s so much more geography to cover, it’s difficult to implement. I’m not saying it’s not happening. I know there are charging points across Canada, but it’s really not proliferating to fleet use at this point.”

Singsank estimates that there are approximately 195,000 light commercial vehicles on the road. “51% of that is what we would consider to be commercial fleet, a good portion of that is commercial fleet.” Popular vehicles include the Ford F-150 pickup and Econoline van, which is being replaced with the Ford Transit. There are smaller vehicles too such as the Ford Transit Connect.

Car sharing? Not yet

“As far as we know, car-sharing is non-existent,” says Singsank, “It’s just like in the US, it’s the geography issue, it’s less developed public transport than there is in Europe. The places you are going to see it is in larger cities, outside those, it’s more difficult to do.”

Business car taxes can vary from province to province, “For instance there’s a provincial tax in Quebec and in Ontario and in a few other provinces there’s a tax on the lease of the vehicle and on some of the services as well. Some of these are reimbursable, but that depends on the various tax rules that the provinces have.”

Financing follows the US model, an open-ended lease, and that tends to be the only choice offered. That finance tends to come from independent fleet management companies, not banks or captives. That is largely because fleet management companies began as dealer based operations and grew their businesses from that start point.

Looking ahead, the prospects for fleets look good in Canada. “We’re expecting growth,” says Singsank, “Interest rates are still low. The used vehicle market in Canada is still very strong.”

With low fuel costs compared with Europe the impact of falling fuel prices may be less than in Europe, or is it? “Certainly, fleets are enjoying paying less for fuel,” says Singsank, “It’s still the second highest cost of running a fleet and they are still very much managing fuel on a day to day basis, because it is such a large spend. We don’t expect to see clients change their selectors because fuel has gone down so much. They’re not going to suddenly put more gas-guzzling vehicles on the road just because they can. They’re thinking ahead as opposed to thinking short-term.”