The most populated province in Canada is investing in energy-efficient vehicles in an effort to “move forward on its plan to become  a world leader in clean energy and manufacturing.” 

The Ontario government announced an investment of almost $16.9 million toward hybrid vehicle production at the Toyota plant in Cambridge, Ontario.

“The investment will allow the plant to produce the Lexus RX450h hybrid and will create 400 new jobs,” officials shared.

Commenting on the news, Dalton McGuinty, premier of Ontario, said, “The auto industry is a cornerstone of Ontario manufacturing. Working together, this investment will ensure Ontario remains at the forefront of new technologies so our auto sector can continue providing hundreds of thousands of good, high-paying jobs for generations to come.”

Ontario is providing the funding through its Strategic Jobs and Investment Fund, and the government of Canada is also contributing $16.9 million to the project, officials said. 

“The investment will help sustain 7,000 jobs at Toyota and thousands more at parts companies across the province,” they added.

As for the OEM’s part, Toyota will put $125 million toward the new assembly line. The project will lead to the first Lexus hybrid produced outside of Japan, the manufacturer shared.

The Hybrid Used Market Set to Grow

With all this talk of new fuel-efficient vehicles in the Canadian government, Auto Remarketing Canada talked with a few industry experts to get the lowdown on the used side of things.

And it seems both the both the value of these units and interest in more fuel-efficient vehicles seems to vary right along with gas prices.

“Hybrid pricing is sensitive to fluctuation in gas prices. When gas prices are high, like in 2008, hybrids perform better. But as we’ve seen gas prices decline, their values decline with it. Currently, hybrids are on the lower side because gas prices have declined over the last three months,” Rene Abdalah, vice president of RVI Group, told Auto Remarketing Canada.

Interestingly, in answering this question, Canadian Black Book vice president of research and editorial Josh Bailey said “hybrid-only” vehicles seem to consistently hold their value at strong rates.

“It is interesting when we look at models that are offered as hybrid-only like the Toyota Prius and Honda Insight, they enjoy stronger value retention when compared to models with a hybrid and conventional powertrain offered,” Bailey said. “For those models with conventional and hybrid powertrain options, the hybrid variant often does not hold its value as well as the conventional powertrain.”

J.D. Power and Associates’ Brian Murphy, senior manager for the Power Information Network, touched on the concept of supply and demand in his assessment.

“It is definitely a game of supply and demand. Every year you see more hybrid products; by nature of that, we can expect to see more in the used market. And whether or not they hold their value speaks to the inherent value of the vehicle, and if it is a quality vehicle, that premium should carry over into the used market,” said Murphy.

The values may be decent for hybrid vehicles, but is there a real consumer interest in used gas sippers in Canada?

According to industry experts, the demand is there, but it continues to fluctuate with gas prices.

First, Abdalah said, “For models that have both hybrids and non-hybrids in the used-car market, non-hybrids are currently performing better, mostly due to the decline in gas prices.

“Depending on the segment, we’ve seen anywhere between a 3-percent to 7-percent retention difference between non-hybrid and hybrid four-year-old vehicles,” he added.

And though buyer interest may vary with gas prices, Bailey explained Canadian consumers are “warming” to the idea of a hybrid vehicle.

“There is demand for hybrids in the used-car market but that demand is often driven by pump prices for fuel, not unlike hybrids sold new. At least anecdotally, we are hearing that the apprehension to buy a used hybrid is easing, people are opening up to the idea.  This should translate into increasing demand without regard to fuel prices,” Bailey explained.

Lastly, should dealers expect this segment to continue to grow in the future?

Abdalah explained that manufacturers are expected to ramp up hybrid production in the next couple of years, which may bring too much supply into the market, “causing some declines within the hybrid segment.”

Meanwhile, Murphy said growth in the hybrid market depends heavily on the consumer.

“Hybrids are still a very small portion of the market — about 1 percent for the used market. Granted, that is a lot more than there was five years ago, but there’s still not that many out there … there is definitely a gap between hybrid and non-hybrid, but what happens with that gap depends on how the public perceives hybrid vehicles and whether they think there is value in them,” he said.

On the other hand, Bailey said it seems hybrid market growth is inevitable as the number of hybrid vehicles on the roads continues to increase.

“I believe that that used hybrids will be a growing market at least in part because of the sheer number of them going on the road is growing every year so the overall unit-in-operation count will be increasing,” he said. “There are also more offering in the marketplace too, this will help expand the market size.”

But it seems we may just have to wait to see to know for sure where this new market segment is heading.

“The hybrid market has added a level of complexity to the used and new market; and it will be interesting to see how it, ultimately, fits in the used industry,” concluded Murphy.

Sarah Rubenoff can be reached at srubenoff@autoremarketing.com. Continue the conversation with Auto Remarketing Canada on LinkedIn and Twitter.