TORONTO, May 8, 2013 /CNW/ - The Canadian auto parts industry performed
well last year in select markets including Mexico, the United States,
as well as advances in sales to India and South Korea, according to the
Scotiabank Global Auto Report released today.
"Outside of these countries, offshore shipments were largely flat, as
the Canadian auto parts sector is still searching for a strategy that
will enable it to benefit from the rapid growth occurring outside of
the mature auto market of North America," said Carlos Gomes,
Scotiabank's Senior Economist and Auto Industry Specialist. "Also,
Canada is heavily reliant on imported auto parts with each vehicle
built in Canada containing nearly $15,000 of imported auto parts -
double the global average of US$7,400."
For more details about the Scotiabank Global Auto Report, please read
the full report below.
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CANADIAN AUTO PARTS INDUSTRY: THE WORLD'S IMPORT-INTENSITY LEADER
Recent global car sales trends
Global vehicle sales edged down in March, undercut by a double-digit
slump in Western Europe and some recent softening in Eastern Europe.
However, purchases remained strong in all other regions, leaving global
volumes up 2% year-over-year during the first quarter. More recent data
for April point to stronger sales, including the first year-over-year
increase in Japanese purchases in seven months. The improvement likely
reflects the depreciation of the yen and the recent stock market rally
which have boosted consumer confidence in Japan to the highest level
since June 2007.
In the United States, car and light truck sales advanced 8% above a year
earlier in April, with volumes buoyed by robust sales of pickup trucks
and crossover utility vehicles. In particular, sales of the Ram pickup
surged 41% year-over-year, while GM's stable of large pickups jumped
19% and Ford's industry-leading F-series climbed 18%. We estimate
retail car and light truck purchases in the United States climbed to
12.4 million units in April from an average of 12 million during the
first quarter. However, fleet volumes, which tend to be volatile on a
month-to-month basis, fell in April and trimmed overall purchases below
an annualized 15 million units for the first time since October 2012.
In Canada, passenger vehicle sales in April posted the first
year-over-year gain in five months. We estimate that purchases
accelerated to an annualized 1.72 million units last month from an
average of 1.66 million during the first quarter. The improvement was
broad-based, with both the Detroit Three and Japanese automakers
posting double-digit gains. Year-to-date volumes have advanced 1%
through April and remain on target to meet our full-year forecast of
1.69 million units - the second-highest on record.
CANADIAN AUTO PARTS EXPORTS MAKE INROADS, BUT UNABLE TO CRACK "GLOBAL
The Canadian auto parts sector performed well last year, with exports
posting a double-digit increase - a sharp acceleration from a 3% gain
in 2011. This solid performance enabled the industry to move up the
global auto parts export ladder. However, the industry was unable to
recapture a position among the global "top 10" auto parts exporters and
had to settle for being the world's eleventh largest exporter last
year. In fact, the industry has not been among the global "top 10" in
the past five years. Prior to the global economic downturn, Canada was
traditionally a top exporter and in 2007 - its last year among the "top
10" - was the world's eighth largest parts exporter.
Last year's improvement reflects a double-digit increase in auto parts
exports to Mexico, a 7% gain in shipments to the United States, as well
as solid advances in sales to India and South Korea. However, outside
of these countries, offshore shipments were largely flat, as the
Canadian auto parts sector is still searching for a strategy that will
enable it to benefit from the rapid growth occurring outside of the
mature auto market of North America. Ninety-eight per cent of Canadian
auto parts shipments still remain in North America - either in Canada,
or exported to its NAFTA partners - a level in line with the average of
the past several decades. However, the region's share of global
vehicle production has slumped sharply, falling to 19% in 2012, down
from one-third of global output in the late 1990s.
Despite last year's improvement, Canadian auto parts exports are still
20% below the level prevailing at the top of the previous economic
cycle in 2007 - one of the worst performance among the top auto
parts-exporting nations. In contrast, U.S. and global auto parts
exports are more than 20% above the previous cycle peak in 2007.
Foreign sales of auto parts by competitors such as Mexico have surged a
stunning 44% over this period. In fact, while Canada has lost it "top
10"export ranking, Mexico has continued to move up the global ladder
and is currently the world's 5th largest parts exporter.
While most of Mexico's auto parts exports are destined to its NAFTA
partners, sales outside of North America have surged nearly 70% since
2007, and now account for 6% of the country's overall parts exports. In
particular, Mexico's shipments to Asia - a region that now accounts for
more than half of global vehicle output - have soared by 86% over the
past six years. In contrast, Canada's auto parts exports outside of
NAFTA have been cut in half over the past six years.
Aside from the lack of an effective export strategy outside of North
America, Canada is also heavily reliant on imported auto parts. While
the nation's status as a "top 10" global auto manufacturer is being
challenged by developing nations, Canada's auto parts industry has
consistently been among the top three importers in the world - behind
the United States and Germany. As a result, Canadian-made vehicles have
the highest content of imported parts among the major vehicle-producing
nations. Each vehicle built in Canada contains nearly $15,000 of
imported auto parts - double the global average of US$7,400.
Each vehicle assembled in Canada contains at least 25% more imported
parts than vehicles built in either the United States or Mexico. We
estimate that cars and trucks assembled in the United States have an
average of US$11,000 of imported parts. The foreign-content of
Mexican-built vehicles is marginally lower, averaging US$10,500 per car
and truck. The import content is even less in Western Europe, averaging
just over US$10,000 per vehicle in Germany, France and Spain - the
continent's largest auto manufacturers.
The higher import content for models built in Canada and the United
States reflects the large two-way trade between the two countries in
semi-finished auto parts. In fact, the bilateral auto parts trade
between Canada and the United States totals roughly US$40 billion per
year — more than 3% of the US$1.2 trillion in global auto parts trade.
However, the net impact of the high import penetration in
Canadian-built vehicles is that rising vehicle assemblies will have
limited impact on reducing Canada's automotive trade deficit.
Engines are the largest component of auto parts imported into Canada,
accounting for nearly one-quarter of the sector's overall imports.
Despite several top-notch engine plants in Canada, over 80% of all
vehicles built in Canada contain imported engines. Transmissions and
electrical systems are the next categories of auto parts heavily
imported into Canada. In fact, we estimate that these three categories
account for roughly half of Canada's overall auto parts imports. Given
the increasing electronics content in today's vehicles, Canada's
deficit in auto parts will be hard pressed to shrink going forward.
SOURCE: Scotiabank - Economic Reports
For further information:
Carlos Gomes, Scotiabank Economics, (416) 866-4735, firstname.lastname@example.org; or
Devinder Lamsar, Scotiabank Media Communications, (416) 933-1171, email@example.com.