Auto sales up, inventories down, production set to rise

Strong sales in China, India and Brazil, and the success of the "cash for clunkers" program in the United States, are driving global recovery in the auto market. U. S. sales were at a nine-month high in August, while in Canada, August light truck sales showed year-over-year increases for the third consecutive month. Annualized sales of cars and light trucks in Canada were above 1.5 million for the second consecutive month, according to Scotia Bank's Global Auto Report, released September 23.

Dealer inventories in the U. S. were at record lows of only 1.41 million vehicles in August, just over half the 2.76 million units in stock one year ago. This means a supply of just 30 days, down from a normal of 65 days. For popular models like the Canadian-made Honda Civic, Toyota Corolla and Chevy Camaro, stocks were even lower. U. S. dealers were virtually out of Corollas. In Asia, inventories were lower still, with supplies for just 22 days at the end of August. Asian-based manufacturers account for nearly half of all North American vehicle output.

Current plans call for vehicle assemblies in Canada to climb to an annualized 1.7 million units in the final months of 2009, nearly 40% above the 1.2 million average of the first half of 2009.

Output in Canada will jump again in early 2010, with Toyota's expanded production of the Corolla at its facility in Cambridge, Ontario.

One immediate spinoff effect of the improved auto sector picture is that advertising budgets are rising again. Toyota recently announced that it will boost fourth-quarter spending on advertising, incentives and dealer support by US$1 billion in the United States, more than 30% above what it typically spends in the final months of the year. GM has also announced an increased marketing push, including a 60-day money-back guarantee.