The cyclical recovery in global auto sales that began in mid-2009 remains intact, according to the most recent Scotiabank Global Auto Report. Gains have averaged 7 per cent over the past three years, including a 13 per cent surge in the first year of recovery.
“We expect a further four per cent advance in 2013, driving global volumes to the fourth consecutive annual record,” said Carlos Gomes, Scotiabank’s Senior Economist and Auto Industry Specialist. “Global sales will be bolstered by strong employment growth in developing nations, record low interest rates and the recent acceleration in the pace of monetary expansion around the globe.”
Car sales in Canada are expected to edge up to 1.69 million units in 2013 – the second-highest level on record and up from 1.68 million this year. Ongoing employment gains (especially in Western Canada) should help support the market, but slowing housing activity will likely dampen consumer confidence and with it, household wealth, limiting the improvement.
“U.S. household balance sheets have improved significantly and are currently at the healthiest level in a decade,” remarked Gomes. “Households have de-leveraged by a trillion dollars over the past four years, leaving them in good shape to replace many of the clunkers still on the road – the average age of the U.S. fleet now exceeds 11 years for the first time on record.”
In contrast, volumes across Western Europe slumped to a 19-year low in 2012 undercut by plunging sales in debt-ridden Mediterranean nations. However, purchases are likely to begin stabilizing in the core countries of northern Europe in coming months, as several leading indicators of economic activity and auto sales have started to improve. Car sales across Western Europe are expected to remain unchanged at 11.7 million units in 2013.
According to the report, China is the key driver of global car sales, accounting for nearly 60 per cent of the increase in world volumes over the past decade. An improving economic performance is expected to lead to a double-digit increase in car sales next year, up from a 7 per cent advance in 2012. China now accounts for nearly 20 per cent of global car sales and one-quarter of global volumes if trucks are included. Increasing urbanization, rising incomes and low vehicle penetration rates will continue to drive rapid gains in China’s car sales over the next decade.
Car sales in Brazil will benefit from the acceleration in the pace of economic growth to 3.5 per cent in 2013 – more than triple this year’s advance – largely due to infrastructure developments ahead of the FIFA World Cup in 2014 and the Summer Olympics in 2016. The central bank has slashed short-term interest rates by five percentage points since July 2011 to spur economic growth.
Russia and Japan were key auto industry growth markets in 2012, with volumes in both nations posting double-digit increases. Much of the strength was provided by government incentives to purchase new vehicles. However, these subsidies have expired in both nations leading to a low-single digit advance in Russia over the coming year and declining volumes in Japan.
After a challenging year marked by the slowest pace of economic growth in India since 2002 and rising inflation, the outlook for 2013 is only slightly better. Car sales in India are projected to advance a moderate five per cent in 2013, in line with this year’s increase. A stronger performance is conditional on inflation pressures subsiding and enabling the central bank to become more aggressive in cutting interest rates.
