North American Auto Market Revs Up, According to Scotia Economics
Friday, April 30, 2010 at 10:10AM Sales Will Be Stronger, for Longer
TORONTO, April 30 /CNW/ - Global car sales continue to accelerate, with purchases advancing 25 per cent year-over-year (y/y) in March - the sixth consecutive double-digit increase, according to the latest Global Auto Report released today by Scotia Economics.
"The emerging nations, especially the BRIC countries, are leading the way with year-over-year gains in excess of 40 per cent," said Carlos Gomes, Senior Economist, Scotia Economics. "However, volumes also continue to gain momentum in North America, and are now advancing at the fastest pace since the introduction of zero per cent financing nearly a decade ago."
The report also states new vehicle prices are moving higher in both Canada and the United Sates, and that consumers are increasingly buying more expensive models.
"In particular, Canadians are shifting from small-and lower-priced cars to more expensive light trucks," noted Mr. Gomes. "In addition, leading indicators of the health of the overall auto market - such as used car prices and the Scotiabank Leading Indicator of Vehicle Sales - continue to drive higher."
Rising used car prices in Canada are particularly encouraging since an appreciating Canadian dollar is boosting imports from theUnited States.
"The Canadian dollar has appreciated by roughly three per cent so far this year, and recently climbed above parity with the U.S. greenback for the first time since May 2008," said Mr. Gomes. "As a result, data from the Registrar of Imported Vehicles indicate that imports from the United Sates have doubled year-over-year in the opening months of 2010, climbing to a record annual rate of 260,000 units, surpassing the 2008 total of 240,000 units and are currently running at nearly three times the 95,000 unit annual average of the past decade.
"However, in contrast to previous occasions, rising imports are not dampening vehicle prices in Canada," continued Mr. Gomes. "In fact, used vehicle prices, as measured by the Scotiabank Used Car Price Index, have advanced 12.9 per cent year-over-year - the sharpest gain since the mid-1990s. Of note, periods of double-digit increases in Canadian used car prices have been followed by an extended period of robust new vehicle purchases."
New car and truck prices have advanced roughly five per cent y/y in the opening months of 2010 - a sharp reversal from declining prices over the past two years. Even prior to the latest global economic downturn, new car prices in Canada had been largely flat between 1998 and 2006.
Small cars normally account for about one-third of the Canadian market, but have fallen to less than 30 per cent of overall purchases so far this year - the lowest level in a decade. CUVs are the major beneficiary of the shift to light trucks. As in the United States, CUVs are the fastest-growing segment in Canada, with volumes surging by 60 per cent so far this year.
"The shift from small cars to more expensive models reflects rising consumer confidence alongside improving economic conditions, including the restoration of job growth since August 2009," commented Mr. Gomes.
"Another key indicator highlighting the strength of the auto market is that North American automakers are profitable once again. In fact, we estimate that profitability has climbed to roughly US$1,500 per vehicle," concluded Mr. Gomes.
Scotia Economics provides clients with in-depth research into the factors shaping the outlook for Canada and the global economy, including macroeconomic developments, currency and capital market trends, commodity and industry performance, as well as monetary, fiscal and public policy issues.
For further information: Carlos Gomes, Scotia Economics, (416) 866-4735, carlos_gomes@scotiacapital.com; Robyn Harper, Scotiabank Public Affairs, (416) 933-1093, robyn_harper@scotiacapital.com
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