North American Auto Demand Shows Resilience Despite Higher Fuel Costs, Budget Strains, Says BMO

Vehicle demand across North America has remained surprisingly resilient despite higher fuel costs, affordability pressures and tariff-related distortions, according to Bank of Montreal Capital Markets (BMO). Canadian new vehicle sales rose 1.9% annually in June to around 182,000 units, ending a prolonged stretch of declines. While year-to-date sales remain down 2.6%, the performance is "respectable" given the challenging backdrop, BMO Senior Economist Erik Johnson wrote. US auto sales have held up better than expected despite continued affordability challenges, said the bank. In June, light vehicle sales ran at an annualized pace of about 16.7-million units, up 4.5% from a year earlier, although sales for the year so far remain about 2.9% lower due to higher vehicle costs and earlier purchases brought forward by anticipated 2025 auto tariffs. Higher fuel costs have weighed on consumers, reducing household spending by an estimated C$3.5 billion in Canada and nearly $35 billion in the United States since late February, calculated Johnson. However, demand for US vehicles has remained relatively strong, supported in part by improved tax refunds and fiscal support in the first.