Global auto sales continue to improve, According to Scotia Economics



    
    - Obama Administration Sets Harmonized Green Agenda
    

    TORONTO, May 29 /CNW/ - Global auto sales continued to improve in April,
led by record volumes in key emerging markets, according to the latest Global
Auto Report releases today by Scotia Economics.
    "Purchases in China, India and Brazil climbed to a record 10.3 million
units (annualized) in April, up from 9.5 million in March and nearly one
million units above the pre-crisis peak of 9.4 million set in May 2008," said
Carlos Gomes, Scotiabank Senior Economist and Auto Industry Specialist.
Volumes in the United States also strengthened through mid-April, but a
late-month slowdown reduced purchases to an annualized 9.3 million units, down
from an average of 9.5 million during the previous three months. The
late-month deceleration likely reflects heightened industry uncertainty, and
the concern about the influenza outbreak in April.
    Canadian passenger vehicle sales remained steady in April, at an
annualized 1.42 million units for the second consecutive month, well above the
1.34 million unit pace of the first quarter. Four manufacturers - including
two Korean automakers - reported record monthly sales, suggesting that
confidence is returning to the Canadian market.

    U.S. Greenhouse Gas Emissions Standard

    President Barack Obama recently announced that the U.S. Environmental
Protection Agency (EPA) and the National Highway Traffic Safety Administration
(NHTSA) will work together towards a harmonized greenhouse (CO2) emission and
corporate average fuel economy standards. It is important to note that the
NHTSA is not imposing a 35.5 miles per gallon (mpg), as has been widely
reported. Rather the EPA is proposing greenhouse house gas (GHG) emissions
standards that, based on its estimates of the 2016 model year sales, will
result, in fleet average CO2 emissions of roughly 250 grams/mile.
    "The key point of this U.S. proposal, and the major reason that every
major automaker has voiced its support, is that it creates a new harmonized
federal standard, thereby eliminating the potential for a patchwork of
individual state emission regulations," added Mr. Gomes. "Automakers had
previously fought against state-by-state emissions regulations, arguing this
would create a patchwork of rules, resulting in billions of dollars of
additional costs, or prevent the sale of some car and trucks in certain
states."
    Canada is likely to move in line with this U.S. proposal. The Canadian
government has set a tailpipe emission standard through the 2011 model year,
and has pledged to update those numbers on a year-by-year basis. The
Environment Minister has also indicated that the best outcome going forward
would be the emergence of a North American standard, a condition met by the
recent U.S. proposal.
    The new U.S. proposal moves up the increase in fuel efficiency by four
years (to 2016 from 2020, as was required by the Bush Administration). This
condensed time frame puts the industry under added pressure to reduce vehicle
weight and invest in green technology. A similar development occurred in the
late 1970s, when a surge in oil prices prompted the U.S. government to
introduce CAFE standards that led to a historic downsizing of vehicles. From
1976 to the mid-1980s, the weight of a typical North American-built vehicle
dropped by nearly 1,000 lbs. (450 kg), mostly due to reduced steel usage,
enabling fuel efficiency to jump by roughly 70 per cent.
    "To facilitate these investments at a time when the industry is
cash-strapped, the U.S. government will provide automakers with up to US$50
billion to fund new technology," concluded Mr. Gomes. However, there is still
the issue of increased costs to consumers. The Obama Administration has said
the efficiency upgrade could cost just $1,300 per vehicle and consumers could
look to recoup much of that by spending less on fuel. However, industry
estimates suggest that higher fuel emissions standards could add between
$5,000 and $12,000 to the retail selling price.

    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.





For further information:

For further information: Carlos Gomes, Scotia Economics, (416) 866-4735,
carlos_gomes@scotiacapital.com; Paula Cufre, Scotiabank Public Affairs, (416)
933-1093, paula_cufre@scotiacapital.com


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