TORONTO, June 6, 2013 /CNW/ - Global vehicle sales bounced back from a
sluggish performance at the end of the first quarter, advancing 8%
year-over-year (y/y) in April, according to the Scotiabank Global Auto
Report released today. The report noted the improvement was broad
based, but was led by more than a 30% y/y surge in South America.
"The strength in global car sales combined with low inventories in many
countries are prompting automakers to ramp up production across most of
the world - a development that will support manufacturing and overall
economic activity, at a time when some surveys point to moderation on
the factory floor," said Carlos Gomes, Scotiabank's Senior Economist
and Auto Industry Specialist. "Brazil is leading the way, but
assemblies rebounded sharply in most regions in April and will continue
to gain momentum in coming months."
For more details about the Scotiabank Global Auto Report, please read
the full report below.
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GLOBAL SALES AND PRODUCTION ACCELERATE
--- South America Leads Broad-Based Improvement
AS AUTO SALES ADVANCE …
Global vehicle sales bounced back from a sluggish performance at the end
of the first quarter, advancing 8% year-over-year (y/y) in April. The
improvement was broad based, but was led by more than a 30% y/y surge
in South America. Purchases in Asia also posted a double-digit
increase, while activity even edged up in Western Europe for the first
time since September 2011.
More recent data for May point to further gains across North America.
U.S. passenger vehicle sales climbed to an annualized 15.3 million
units in May, up from an average of 15.1 million during the previous
three months. The improvement reflects the highest consumer confidence
since early 2008, easy credit and an improving housing market. Pickup
truck volumes — a barometer of the health or weakness of the small
business and construction sectors — were the main beneficiaries, with
purchases of Detroit Three pickups surging 26% y/y, triple the overall
Sales also continued to improve in Canada last month, climbing 5% above
a year earlier to an annualized 1.78 million units — the best
performance since early 2008, prior to the global economic downturn.
The gains were broad-based, with seven manufacturers posting
double-digit y/y increases, partly due to enhanced incentives. As in
the U.S., light trucks — especially pickups and crossover utilities —
led the way with an 8% year-over-year increase. So far this year,
light truck purchases have advanced 6% year-over-year, with most of the
strength concentrated in Western Canada.
…GLOBAL VEHICLE PRODUCTION REBOUNDS
The strength in global car sales combined with low inventories in many
countries are prompting automakers to ramp up production across most of
the world — a development that will support manufacturing and overall
economic activity, at a time when some surveys point to some moderation
on the factory floor. Brazil is leading the way, but assemblies
rebounded sharply in most regions in April and will continue to gain
momentum in coming months.
Vehicle production in Brazil surged 31% y/y in April, led by a
staggering 56% y/y increase in truck output. The resurgence in vehicle
sales and production in South America's largest economy largely
reflects government stimulus policies, especially the reduction of the
industrial tax for vehicles produced in Brazil. The tax break is
designed to support the Brazilian auto industry and was originally
introduced last year, but was recently extended. The tax reduction is
currently scheduled to remain in effect through the end of 2013 and
will provide a boost to overall economic activity, as the auto sector
accounts for nearly 4% of Brazil's GDP. In fact, rising vehicle
production in April lifted overall industrial activity in Brazil 8.4%
y/y - the best performance since August 2010.
Vehicle output in Asia also rebounded in April, led by a 20% y/y
increase in Thailand and a solid rebound in Japan. A
stronger-than-expected improvement in industrial activity in Japan
during April was driven by a 16% month-to-month jump in vehicle
production on the island nation. In fact, aside from the outsized surge
in vehicle assemblies, industrial activity in Japan was largely flat.
In addition, with vehicle inventories in Japan 23% below a year
earlier, further gains are scheduled for coming months. Rising
assemblies will provide a further boost to industrial activity, as the
sector accounts for 10% of overall industrial production in Japan.
Japanese automakers are also boosting production outside of Japan. Data
for April indicate that assemblies by Japanese automakers outside of
Japan climbed 9% y/y — a significant improvement from a flat
performance during the first quarter. Most of the increase occurred in
China, as the impact of the territorial dispute with Japan over
resource-rich islands appears to be moderating.
Auto output has also started to rebound in South Korea, after a
double-digit decline in the first quarter. The improvement reflects
continued gains in global market share by Hyundai and Kia. Global sales
by Hyundai-Kia Group have advanced 7% y/y through May double the
increase in global industry volumes. Continued gains in global share by
Korean automakers point to accelerating industrial activity in South
Korea. Two-thirds of all vehicles sold globally by the Hyundai-Kia
Group are produced in South Korea.
Automakers also plan to boost North American production in coming
months. Given strengthening demand, North American vehicle output is
scheduled to jump to an annualized 16.4 million units in the second
quarter — the highest level since 2006 and a significant ramp up from
an already elevated 16 million during the January to March period. In
fact, several automakers are foregoing their two-week summer shutdown
to continue cranking out new cars and light trucks to keep dealers
flush with product. As a result, third-quarter assemblies
(June-September) are scheduled to accelerate to 5% y/y, from a 2%
increase through the end of June. Output will gain momentum throughout
the quarter, with September assemblies scheduled to jump more than 8%.
Mexico and the U.S. will benefit most from the ramp up in vehicle
assemblies, while activity in Canada will be held back as General
Motors ceases production at its Oshawa Consolidated Line by the end of
June. Assemblies in Mexico are likely to reach an annualized 3.3
million units in the July-September period, up from 3.0 million in the
first half of 2013. Output will be boosted by the changeover to the
2014 model year for General Motors' new GMT900 pickup trucks.
Production of the new trucks began in Silao, Mexico last month and line
speeds will gain momentum throughout the summer.
Assemblies in Mexico will also get a significant boost from the addition
of new products. For example, Nissan will raise its third-quarter
Mexican production 44% y/y, due to the recent production start-up of a
small cargo van at Cuernavaca. The company will also add a small
multipurpose vehicle at Aguascalientes.
The strong rebound in demand for pickup trucks and crossover utility
vehicles this year has left several models in short supply and means
that truck production will post the strongest gains during the summer
months. In the case of pickups, Ford's Kansas City 2 plant which builds
the Ford F-150 will change from a two-shift to a three-shift operation
during the third quarter. This move will add roughly 50,000 units to
the facility's annual capacity.
SOURCE: Scotiabank - Economic Reports
For further information:
Carlos Gomes, Scotiabank Economics, (416) 866-4735, email@example.com; or
Devinder Lamsar, Scotiabank Media Communications, (416) 933-1171,