TORONTO, May 31 /CNW/ - Strong sales gains have driven the global auto industry back to profitability, according to the latest Global Auto Report released today by Scotia Economics.
"The five largest auto manufacturers posted earnings of US$5.5 billion in the first quarter of 2010, a sharp turnaround from annual losses averaging in excess of US$22 billion from 2007 through 2009," said Carlos Gomes, Senior Economist, Scotia Economics.
In the report, Mr. Gomes noted that profitability improved in every region last quarter, especially in North America, with the five largest automakers returning to profitability in the region. However, despite the turnaround in North America, Asia remains not only the auto market with the greatest potential, but is already the most profitable market in the world.
"The global economy continued to gain momentum through the first quarter of 2010, with growth picking up to roughly four per cent year-over-year - the fastest pace in two years," commented Mr. Gomes. "This acceleration lifted global car sales 25 per cent above a year earlier, to a level only marginally lower than in early 2008. However, volumes still remain nearly five per cent below the industry peak set in mid-2007."
Profitability per vehicle in North America jumped to more than US$1,500 in early 2010, compared with losses through September of last year, and will likely improve further in coming years as volumes expand. For example, light vehicle purchases in Canada, the United States and Mexico totaled an annualized 13.3 million in the opening months of 2010, and are expected to climb to 13.9 million for the full year, before rising to 14.6 in 2011.
"Of note, the jump in profitability occurred despite nearly a US$200 increase in industry-wide U.S. incentives through March, to more than US$2,800 per vehicle," said Mr. Gomes.
The report also states that the five largest automakers reported a first-quarter operating profit of more than US$2.3 billion in emerging Asia - roughly 40 per cent of their overall total.
"This is particularly surprising, as the average car price in countries such as China and India averages less than US$12,000 compared with US$24,000 in North America and about US$20,000 in Europe," stated Mr. Gomes. "In contrast, the industry still continues to lose money in Europe."
The five largest automakers are still losing about US$400 per vehicle in Europe, with losses likely to increase in coming months, as recent austerity measures introduced in several countries act as a drag on economic growth and vehicle sales.
"We expect full-year sales in Western Europe to decline to 12.3 million units in 2010, down from an annualized 13.6 million in the opening months of the year," concluded Mr. Gomes. "In fact, car sales in Europe fell six per cent year-over-year in April, led by a sharp fall-off in Germany. However, outside of Europe, purchases continue to strengthen - rising 23 per cent year-over-year - led by a 27 per cent gain in the BRIC nations."
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: For further information: Carlos Gomes, Scotia Economics, (416) 866-4735, firstname.lastname@example.org; Robyn Harper, Scotiabank Public Affairs, (416) 933-1093, email@example.com