TORONTO, Nov. 29, 2011 /CNW/ - The Canadian auto industry continues to
rebound from the global economic downturn and this year's supply
disruptions caused by natural disasters in Japan and Thailand. However,
according to the latest Global Auto Report released today by Scotia
Economics, investment in the industry will fall to $1.2 billion this
year — the lowest level since the mid-1980s and roughly 62 per cent
below the $3.1 billion annual average of the past decade.
"Canada is maintaining its historical 16 per cent share of North
American assemblies, and according to J.D. Power, a Canadian assembly
plant was recently rated the best in North America for the second
consecutive year," said Carlos Gomes, Senior Economist and Auto
Industry Specialist, Scotia Economics. "In fact, strong investment in
machinery and equipment since the mid-1990s has enabled two Canadian
assembly plants to be rated the best in the Americas in six of the past
10 years. However, despite these achievements, current investment
plans are less positive for Canadian plants, suggesting that it will be
difficult for Canada to increase its share of North American output
Capital investment in the North American auto industry peaked in 2007
and is finally stabilizing after a 35 per cent slump through 2010.
Investment is actually strengthening in the United States this year, in
part because during the latest contract negotiations with the Detroit
Three, the UAW was able to secure additional investment for U.S.
plants. Capital expenditures have also started to stabilize in Mexico,
and according to recent announcements will rebound sharply next year.
In contrast, investment in the Canadian industry will fall an
additional 18 per cent this year.
"On a per vehicle basis, auto industry investment in Canada this year
will plunge 43 per cent below the prevailing level in the United
States," noted Mr. Gomes. "This represents a sharp reversal from the
trend of the past decade, when investment in the Canadian auto industry
was, on average, three per cent higher than either in the United States
While investment in Canada remains marginally higher than in Mexico,
recent announcements indicate that over the next several years,
investment in Mexico's auto industry is set to approach the record pace
of US$1,600 per assembled vehicle set in 2004 and 2005. During those
two years, Mexico's auto sector was the recipient of 17 per cent of the
industry's overall investment in North America, nearly double its share
of vehicle production. This capital influx expanded assembly capacity
in Mexico by 20 per cent, and has enabled it to consistently produce
more vehicles than Canada since 2008.
"Recent announcements of new products and hires for Canada by two large
automakers are encouraging," concluded Mr. Gomes. "However, these
announcements pale in comparison with the news coming from Mexico — the
auto industry's North American growth leader. Over the past six months,
the industry has announced investments of nearly US$3 billion geared to
expand existing facilities or building new plants in Mexico."
Looking at car sales, global volumes continued to move higher in
October, but the gains moderated to only two per cent year over year
last month, undercut by product shortages in Asia and double-digit
declines in the key growth markets of India and Brazil. North America
led the sales gains in October, with purchases in the United States
climbing to an annualized 13.2 million units — the highest level since
cash-for-clunkers in mid-2009. The improvement reflects increased
availability of vehicles at Japanese dealerships, as well as
strengthening replacement demand.
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.
SOURCE Scotiabank - Economic Reports
For further information:
Carlos Gomes, Scotia Economics, (416) 866-4735, email@example.com; Patty Stathokostas, Scotiabank Media Communications, (416) 866-3625, firstname.lastname@example.org.