TORONTO, Nov. 3, 2011 /CNW/ - The global recovery in car sales remains
intact, despite recent concerns that the global economy may be slowing,
according to the latest Global Auto Report released today by Scotia
Economics. In September, global volumes accelerated to a six per cent
year-over-year (y/y) gain - the strongest advance since February.
Preliminary data from nations that account for nearly half of overall
global volumes indicate this trend remained in place in October.
"Used car prices are a leading indicator of the health of the overall
auto market, and strengthening prices also point to improving demand in
2012," said Carlos Gomes, Senior Economist and Auto Industry
Specialist, Scotia Economics. "Scotiabank's Used Car Price Index
accelerated to a 7.4 per cent y/y increase in September - the strongest
gain since April 2010. The increase is being driven by double-digit
increases for three- and four-year old models."
The strength in Canadian three-to-four-year old used car prices reflects
a sharp reduction in the number of vehicles coming onto the resale
market. This shortfall is the direct result of the plunge in fleet and
leasing volumes since 2008. The number of leased new vehicles has
slumped to only 250,000 units per annum over the past two years - 60
per cent below the average of the previous ten years. In addition,
fleet purchases of new cars and light trucks in Canada have dropped to
roughly 200,000 units annually since 2008 - nearly 100,000 units below
the average of the past decade.
These sharp reductions are leading to a significant decline in the
number of pre-owned vehicles coming back onto the Canadian used vehicle
market. In fact, the reduced supply of pre-owned models will be a
multi-year development, and should support higher used car prices in
Canada for an extended period.
"In contrast to solid price gains for vehicles that are at least three
years old, price increases for one-year old models have moderated in
recent months, undercut by enhanced incentives for new models,"
continued Mr. Gomes. "We estimate that increased incentives on new cars
and light trucks have trimmed new car prices by roughly two per cent
since the spring - a sharp reversal from solid price gains in the
opening months of 2011. In fact, this year's enhanced incentives have
led to the steepest decline in Canadian new car prices since the global
economic downturn in 2008."
In the United States, the price of pre-owned vehicles - as measured by
the Manheim Used Car Price Index - has also been climbing since May
2009, just prior to the start of the global economic recovery.
However, in contrast with developments in Canada, price increases in
the United States have moderated in recent months. This reflects some
increase in the number of vehicles being cycled out of the rental
fleet, after a pickup in rental industry purchases in the second half
of 2010. Despite this temporary blip, the supply of used vehicles also
continues to be relatively tight in the United States due to a sharp
fall-off in new vehicle sales in recent years.
In particular, the number of vehicles coming off-lease in the United
States will drop sharply in 2012, as only 1.8 million units have been
leased annually since 2008 - nearly 50 per cent lower than the average
of the previous decade. This shortfall is already having an impact on
the number of pre-owned vehicles imported into Canada from the United
"Reduced imports of pre-owned cars and light trucks from the United
States are being felt most noticeably in British Columbia," concluded
Mr. Gomes. "The province is the destination for roughly one-quarter of
all pre-owned imports from the United States - more than double its
share of the Canadian vehicle market. The province's disproportionate
share of U.S. imports reflects the proximity of the heavily populated
Lower Mainland to major U.S. cities, such as Seattle."
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.