With a stable domestic market and a healthy export business built upon multiple free trade agreements, the Canadian RV industry has been a global bright spot. As the country emerges from the Covid-19 pandemic, manufacturers there look to grow even stronger.
Words Craig Ritchie
With a stable domestic market and a healthy export business built upon multiple free trade agreements, the Canadian RV industry has been a global bright spot. As the country emerges from the Covid-19 pandemic, manufacturers there look to grow even stronger.
It was all going so well. Sales were solid, RV shows were well attended, interest rates remained low and the cost of fuel was minimal. The currency exchange against the US dollar had settled into a sweet spot for both import and export trade and, most importantly, consumer interest in going RVing was growing exponentially. By the end of February 2020, the Canadian RV industry was flying high. Then not even two weeks later it all came crashing to a halt as the country went into Covid-19 lockdown.
By mid-March Canada’s handful of isolated coronavirus infections had exploded to the point where most of the country was under a state of emergency, with new travel restrictions, aggressive social distancing measures and all non-essential businesses closed by government order.
While the directives worked from a healthcare perspective – Canada quickly flattened its infection curve, with most regions peaking by late April – the economic impact has been enormous. By late April the federal government had committed nearly C$300 billion in support of Canadian businesses and announced first steps toward to re-opening the economy, leaving RV manufacturers, dealers and parts and accessory manufacturers with hope, but an unclear path forward. “The saving grace in all of this is that the reasons for consumers to buy an RV haven’t changed, they’ve only grown stronger,” says Canadian RV Association (CRVA) president, Shane Devenish. “The buyers have been confined to their homes for the last couple of months, so we expect that when restrictions are relaxed many people will want to get away and be outside. I don’t think they’ll have much appetite for taking a flight or going on a cruise in the near future, so it’s quite possible we will see a bit of a sales surge later in the year.”
The domestic RV market
The RV industry is big business in Canada, averaging approximately C$3.4 billion in retail sales each year. Post-purchase expenditures contribute another $1.7 billion or so to the Canadian economy, in the form of value-add costs like insurance, storage and fees. Tourism spending associated with the use of RVs exceeds $3.3 billion each year, with Canadians taking an average of 8.8 million trips per year according to the Recreational Vehicle Dealers Association of Canada (RVDA Canada). The organisation’s 2018 Economic Impact Of The Canadian RV Industry pegs total consumer spending on RVing at over $6.1 billion every year, generating $1.9 billion in tax revenue, $4.2 billion in labour income and supporting more than 66,000 jobs.
In spite of lower wholesale shipments over the past 18 months, RV retail sales in Canada have remained brisk. “Over the last two quarters of 2018 and through all of 2019 dealerships were busy clearing their lots, there was just too much inventory in the pipeline,” says Devenish. “That’s the reason manufacturers were shipping less product. People see the shipments were down by 32 percent and think oh, that doesn’t sound very good, but in reality the dealers were selling a lot of product and doing quite well, and right across Canada.”
Prior to the arrival of the coronavirus pandemic, retail sales in Canada had been very good indeed. The consensus among dealers suggests that while sales coming into March of this year remained slightly behind 2019 numbers, they were clearly gaining pace. “January was a little bit soft and I think part of that was weather-related, as we had a number of major RV shows in different parts of the country that were impacted by winter storms,” says RVDA Canada president, Eleonore Hamm. “But the rest of the shows did really well – at least until we came to March, when things got scary and they started to be cancelled. The Canadian RV industry had ended the 2019 season down 13.1 percent compared to the previous year, but the dealers were optimistic that 2020 was going to be a rebound year and they were going to move a lot of inventory. Everything was certainly pointing that way, sales were clearly picking up.”
Increasingly, those sales were being made to first-time buyers. According to RVDA Canada and CRVA data, an estimated 2.1 million Canadian households – or around 15 percent of the national total – already own an RV. New buyers to the market are, in many cases, new to RV camping altogether. “It’s not just the baby boomers any more, millennials now represent one of the largest buying segments in Canada,” says Hamm. “And they’re not using the RV just to go camping. They use it to go fishing, or rock climbing, or to attend concerts or do other activities just for the day. The industry’s consumer messaging has been about enjoying experiences, and these buyers have extended the definition of that.”
What is particularly surprising with so many first-time buyers in the mix is that Canadian RV sales through March have been trending upward not only in unit numbers, but in dollars as well with a clear increase in average retail prices. Where first-time buyers have historically purchased entry-level units, that is not the case anymore as young families place a premium on upscale features and in particular, electronic amenities.
That said, baby boomers remain the largest consumer group overall, with most now putting a premium on comfort and high-end finishes. “We were seeing very strong sales all across Canada and in the US prior to the arrival of Covid-19,” says Keith Donkin, president of Kelowna, British Columbia-based truck camper and travel trailer manufacturer Northern Lite. “Most of our buyers are still the baby boomers who want high-end everything, and that has been reflected in our sales. But I’m sure we’ll see more millennials moving forward because they also place a high value on quality and premium amenities.”
Donkin notes that while the truck camper market has continued to grow steadily across Canada, Northern Lite has recently expanded its product line with a re-launch of a travel trailer product – seen as being more appealing to young families with children, and offering greater comfort to aging boomers. The first SKU to be offered will be its new-from-the-wheels-up Boreal 23FB. Featuring an edgy, futuristic design, the 23-foot fibreglass travel trailer sleeps four and features the latest in high-tech appointments, including a pair of 100-watt solar panels. “We’ve had a lot of interest in the trailer line from both dealers and consumers,” he says. “It’s been in development for the last year-and-a-half and is a one-piece, four-season travel trailer which is absolutely seamless, which is an industry first. We anticipate they should begin arriving on our dealer lots by late summer.”
Also launching a new travel trailer line this year is Hensall, Ontario-based trailer manufacturer General Coach. President Roger Faulkner believes that the large-scale market consolidation taking place among US trailer manufacturers has created opportunities for more nimble Canadian builders, which can generate rewarding profits with products built in more modest volumes. “As a manufacturer you have to find an empty room,” he says. “There’s no sense in trying to go head-on against huge competitors that have massive resources, and trying to beat them at their own game. You won’t win. So we’re building products that no one else is even looking at.”
The company’s new Citation Reward trailer line is described as “a very high-end, very expensive smaller trailer” that will appeal equally to affluent baby boomers and upwardly-mobile millennials. “We were just about to launch it into the market when the Covid-19 pandemic hit,” says Faulkner. “So for now we’re holding it back until things improve, but we’re absolutely going forward as soon as we can. We have 10 dealers in Canada at this point and we’re looking forward to bringing this to market.”
A return to manufacturing travel trailers is a natural progression for General Coach, says Faulkner. Celebrating its 70th anniversary this year, the company is best known for its park model units, although the firm has also gained extensive experience over the past 15 years crafting custom trailers for the motion picture industry in Canada, the US and Europe. “The theatrical trailers provide a place where the cast and production crews can prepare for a shoot, or go between takes to unwind and relax,” he says. “The movie industry has been growing exponentially, and it’s been a good business for us. We have an experienced team applying the knowledge they’ve gained serving that market to our new Citation Reward line, and we’re looking forward to the official launch later this year.”
Free trade
The manufacture of RVs in Canada represents at least $470 million in economic impact each year according to RVDA Canada and the CRVA, with 80 percent of the product exported to foreign buyers – the vast majority of them located in the US.
The great irony is that in the face of that massive export business, approximately 95 percent of the RVs sold at retail in Canada are imported from manufacturers based in the US. “Canada has a strong manufacturer base for Class B motorhomes, truck campers and park models, in particular,” explains RVDA Canada’s Eleonore Hamm. “But travel trailers and fifth wheels are still the largest segment of the industry, and there are very few domestic manufacturers in Canada producing those. So the product we’re exporting is quite different from the product that we import.”
Beyond the varied product mix, there is also the matter of dealer proximity. Canada’s vast geography and comparatively sparse population have typically seen domestic manufacturers do well in their own region, but face steeper competition in more distant markets where they come head-to-head with US-based competitors that may actually be located physically closer to local dealerships, in spite of being situated on the other side of an international border. In some cases, simple proximity allows an American manufacturer to better serve dealers in a given region than a Canadian builder can. This curious arrangement stems from the near-total integration of the Canadian and US economies following more than 30 years of free trade.
Canada has enjoyed free trade agreements with the US since the implementation of the Canada-US Free Trade Agreement in 1987. This accord was expanded to include Mexico in 1994 with the signing of the North America Free Trade Agreement, and replaced again with the new US-Mexico-Canada Agreement in March of this year. While lost in the tsunami of Covid-19 news coverage as it happened, the ratification of this latest trade agreement by Canada marked an important step for the RV industry, by providing investors with greater fiscal clarity and manufacturers with much-needed stability in both their supply and distribution channels moving forward – including a measure of tariff relief.
Thanks to decades of free trade, supply chains and distribution chains in North America are today fully integrated, a situation that results in many parts and accessories crossing the border multiple times before they’re finally sold to an end-user. Bauxite mined in Canada, for example, is often refined by smelters located in the US, which may in turn sell the raw aluminium plates back to an RV builder in Canada. In many cases, the RV manufacturer then uses that raw aluminium in a camper, which is subsequently sold to a dealer in the US. This extensive cross-border movement of material has become commonplace, making the importance of a free-trade agreements absolutely paramount. Adding further material shipments to and from Mexico only underscores how complex North American supply and distribution chains have become.
Besides the US and Mexico, Canada enjoys free trade agreements with 22 other nations and now, with the EU through the Comprehensive Economic and Trade Agreement (CETA) signed in 2014. The country’s open trade policy has greatly benefitted Canadian manufacturers, who leverage a favourable exchange rate against the US dollar in order to enjoy a unique competitive advantage – the ability to sell their products worldwide on the basis of both quality and price at the same time.
