Canada’s automotive retail market remains challenging as affordability pressures, financing costs and broader economic uncertainty continue to weigh on consumers, according to AutoCanada Inc., one of the country’s largest dealership groups.
AutoCanada CEO Samuel Cochrane said the Canadian auto market remained soft during the second quarter and that the company expects difficult conditions through the balance of 2026. His outlook comes even as national vehicle sales have shown tentative signs of stabilization following a weak first half of the year.
“The Canadian auto market remained soft in Q2,” Cochrane told analysts during AutoCanada’s second-quarter earnings call. “Consumers are still dealing with affordability pressure, higher financing costs and broader economic challenges facing Canada.”
Canadian new light-vehicle sales declined approximately 2.6% during the first half of 2026 compared with a year earlier. The market improved more recently, with year-over-year gains in June and July after a prolonged stretch of monthly declines, pointing to stabilization rather than a broad recovery.
Against that backdrop, AutoCanada is working to improve the performance of its dealership network while acknowledging that some of its recent challenges have been company-specific rather than entirely the result of weaker consumer demand. Revenue from continuing operations increased 6% year over year to $1.4 billion in the second quarter, while same-store revenue rose 5.5%.
Profitability moved in the opposite direction, with gross profit falling 8.1% to $207 million and adjusted EBITDA declining to $52 million from $64 million a year earlier. Net income from continuing operations was $12.1 million, compared with $18.9 million in the prior-year quarter, underscoring the company’s challenge of translating higher sales into stronger margins and earnings.
AutoCanada Works to Rebuild New-Vehicle Performance
Cochrane said new-vehicle sales and gross profit per unit remain affected by both the softer Canadian market and internal work underway to improve sales productivity across AutoCanada’s dealerships. The company is rolling out a new in-house sales training program and has been rebuilding its operating team, with management expecting those initiatives to have a more meaningful impact on new-vehicle sales and profitability heading into 2027.
There are early signs of improvement. Cochrane said AutoCanada began gaining new-vehicle market share again in June and that the trend continued into July. “The first step was winning volume back,” he said. “That’s happened.”
The next challenge is restoring margins. Cochrane said AutoCanada no longer views operating expenses as its primary problem and instead needs to generate more profitable growth through stronger vehicle volumes and improved gross profit per unit. The company still sees opportunities to reduce costs through automation, technology and better processes, but management estimates those savings at roughly $4 million to $5 million rather than a major additional restructuring opportunity.
Regional Differences Across Canada
AutoCanada is also seeing meaningful regional differences within the Canadian market. Cochrane described Alberta as particularly strong and pointed to optimism surrounding investment in the province. Saskatchewan and Manitoba are also performing comparatively well, while British Columbia and Ontario have been more difficult markets.
The comments reflect an uneven national environment. Ontario was the only province to record a year-over-year decline in new light-vehicle sales in June, even as overall Canadian sales returned to modest growth.
AutoCanada’s results do not perfectly mirror the national market because its dealership portfolio does not include every major automotive brand. Cochrane noted that AutoCanada does not represent Toyota or Tesla, two brands that have been performing strongly. Toyota Canada, for example, reported record first-half sales in 2026, with approximately 129,700 vehicles sold, up 4.4% from a year earlier. The distinction helps explain how national sales can improve while some of AutoCanada’s dealerships continue to face a more difficult environment.
Used Vehicles Gain Momentum
Used vehicles were among the stronger areas of AutoCanada’s business during the quarter. Used-vehicle revenue increased 13.3%, supported by a 10% increase in retail units and a 2.9% increase in average selling price. Management also said the company is generating more sales while carrying less used inventory, reflecting improvements in how quickly vehicles are moving through its dealerships.
Cochrane said AutoCanada can now carry approximately 6,000 to 7,000 used vehicles while turning roughly half of that inventory during a month, a level of velocity the company has not consistently achieved for several years. Margins have not yet fully recovered, however, as AutoCanada continues to work through older vehicles that have been sitting in inventory for longer periods.
Management does not expect a dramatic improvement in used-vehicle gross profit per unit during the third quarter. Cochrane said front-end vehicle margins should begin looking more normalized during the fourth quarter and into 2027 as older inventory is cleared and tighter purchasing and inventory controls take effect.
The improvement in AutoCanada’s used business comes as affordability remains a major consideration for Canadian vehicle buyers. Used-vehicle prices have generally eased from previous highs, while industry data have shown comparatively strong turnover among more economical and value-oriented models. The trends do not necessarily indicate a broad shift away from new vehicles, but they reinforce the importance of price and monthly-payment considerations in the current market.
Finance, Service and Customer Retention
Finance and insurance remained one of AutoCanada’s stronger profit categories during the quarter. F&I gross profit increased 4% year over year, while average gross profit per retail unit rose to $3,410 from $3,337. AutoCanada attributed the improvement to stronger dealership execution and increased penetration of finance and insurance products.
Management is placing a similar emphasis on parts and service, where it believes there is substantial room to improve customer retention and profitability. Cochrane said AutoCanada wants to become more proactive about communicating with customers after a vehicle purchase and following subsequent service visits.
The company has added staff specifically focused on that effort while also working to recruit more technicians and increase service-bay utilization. While Canada’s vehicle fleet remains relatively old, Cochrane said AutoCanada is not seeing a dramatic new consumer shift toward keeping vehicles longer and views the larger opportunity as retaining more customers already moving through its dealerships and service departments.
Collision Repair Becomes a Larger Growth Platform
That customer-retention strategy increasingly extends into collision repair. AutoCanada has been expanding its collision business through ACX, which now includes 37 corporate-owned collision centres across Canada. The company views collision repair as an important growth platform that can benefit from insurer relationships, manufacturer certifications and referrals from its dealership network.
During the second quarter, AutoCanada added Contemporary Coachworks North and South in Calgary and Mascarin Collision Centre in Thunder Bay. It subsequently expanded further in Ontario through the acquisition of a collision centre in Stratford.
The Contemporary Coachworks acquisition added approximately 30,000 square feet of repair capacity in Calgary and expanded AutoCanada’s presence in higher-end vehicle repair, including certifications for brands such as BMW, Mercedes-Benz, Lexus, Volvo and Tesla. Mascarin brought the company into the Thunder Bay market with an established collision business, while the Stratford acquisition supports AutoCanada’s regional hub-and-spoke strategy.
AutoCanada is looking to increase throughput across the platform, add manufacturer certifications and insurer relationships, strengthen technician development and expand higher-value services including vehicle diagnostics and calibration. Collision revenue declined year over year during the quarter, although management said the comparison was affected by unusually high hail-related repair activity in the prior year and by newer locations that have not yet reached full capacity. Cochrane said recent hail activity in the Prairies should support stronger collision performance during the third and fourth quarters.
Strategically, the collision expansion allows AutoCanada to capture a larger share of the customer relationship throughout the life of a vehicle. A customer can purchase and finance a vehicle through the dealership, return for maintenance and repair, use an affiliated collision centre following an accident and potentially remain within the AutoCanada network when it is time to replace the vehicle.
AutoCanada Sells Three B.C. Dealerships
At the same time that AutoCanada is investing in collision repair and working to improve its dealerships, the company is becoming more selective about which retail locations it is prepared to retain. After the second quarter, AutoCanada completed the sale of three British Columbia dealerships: Island Chevrolet Buick GMC in Duncan, Abbotsford Volkswagen and Chilliwack Volkswagen.
The dealerships were sold for approximately $32.2 million in gross proceeds. They had generated roughly $111 million in revenue during the trailing 12 months ended in the first quarter of 2026 and recorded a net loss of approximately $1 million. AutoCanada said the locations were outside its core regional dealership clusters, limiting opportunities to generate greater operating scale and efficiency.
Cochrane emphasized that the sales do not represent a retreat from Canada. AutoCanada remains committed to eventually growing its dealership platform across the country, but management is prepared to sell locations where it does not see a compelling path to adequate returns.
“There probably are one or two that are on the fence and other unlocks that could be there, but nothing imminent at this time,” Cochrane said when asked whether additional Canadian dealership sales could follow. AutoCanada currently operates 61 franchised dealerships in Canada representing 23 automotive brands across eight provinces, along with three independent used-vehicle dealerships.
U.S. Exit Advances Canadian Refocus
The company is simultaneously nearing completion of its exit from U.S. dealership operations. AutoCanada has received approximately $106 million from completed U.S. divestitures and has agreements in place for the remaining dealerships. Management now expects total proceeds of at least $130 million, subject to closing conditions and manufacturer approvals, with the proceeds expected to help reduce debt.
Together, the U.S. exit and selective Canadian dealership sales are sharpening AutoCanada’s focus on improving returns from its core Canadian network while directing capital toward areas where management sees stronger growth opportunities, including collision repair.
For the remainder of 2026, AutoCanada plans to continue rebuilding sales productivity, improving vehicle margins, increasing service and parts performance, integrating its collision acquisitions and strengthening its balance sheet. Management continues to describe 2026 as a transition year for the dealership business, with more significant improvements expected as inventory normalizes and operational changes take hold heading into 2027.
AutoCanada has begun restoring vehicle volumes and dealership market share, according to management. The next test will be whether those gains translate into stronger margins and more consistent profitability as Canadian consumers continue to navigate a difficult vehicle affordability environment.
