TORONTO, Dec. 29 /CNW/ - A cyclical recovery in global auto sales began in the spring of 2009 and will gain momentum in the new year, according to Scotia Economics' latest Global Auto Report. The emerging markets of China, India and Brazil will lead the way, but mature markets will also post gains in 2010, led by a double-digit advance in the key U.S. market.
"Global car sales will continue to be buoyed by the ongoing massive and synchronized monetary and fiscal stimulus, which has generated a global economic recovery, including improving auto lending across the globe," said Carlos Gomes, Senior Economist, Scotia Economics. "In fact, we estimate that auto loans across major markets bottomed in the first quarter of 2009 and have improved consistently alongside a thawing in global credit markets and falling interest rates."
According to the report, improving access to credit and a return to three per cent growth in the global economy will enable 2010 car sales to recapture half of the ground lost over the past two years, setting the stage for record volumes in 2011.
Vehicle purchases in the United States have reversed the downward sales trend, with volumes advancing above a year earlier since August alongside a nascent economic recovery.
"Going forward, purchases will be bolstered by rising incomes, improved pent-up demand and record new vehicle affordability," said Mr. Gomes. "Income from private sector employment has been advancing since April 2009, and unemployment insurance claims are now at the lowest since September 2008. Strengthening used car prices, currently 19 per cent above a year earlier, will also encourage some households to replace their aging vehicle."
Vehicle scrappage is an even more important driver of sales in Canada, and will underpin purchases of 1.53 million units in 2010, up from 1.45 million this year.
"On average seven per cent of the Canadian fleet is replaced each year," commented Mr. Gomes. "However, the scrappage rate slumped to less than six per cent in 2009, as the global economic downturn prompted Canadians to tighten their wallets and continue to drive their aging vehicles.
"An improving economic outlook has recently lifted the confidence of Canadian households more than 50 per cent above the late-2008 low, prompting many to begin returning to auto dealerships," continued Mr. Gomes.
China became the world's largest auto market in 2009, surpassing purchases in the United States. Car sales in China surged by more than 40 per cent to 7.3 million units in 2009, driven by government incentives including a reduction in the sales tax to five per cent from ten per cent for small fuel-efficient vehicles with engines less than 1.6 litres. Government incentives, rising household income and a low penetration rate will lift sales by 20 per cent to nearly 9 million units in 2010.
In India, car sales climbed to a record 1.4 million units in 2009, with gains accelerating sharply in the second half of 2009, as GDP growth strengthened to the fastest pace since early 2008, and credit availability improved. Historically, about 80 per cent of overall vehicle purchases in India require financing. However, the global credit crunch led to a significant reduction in auto loans through early 2009.
"Auto financing has begun to flow again in recent months, and combined with falling interest rates, now accounts for about 75 per cent of overall volumes in India," concluded Mr. Gomes. "Prospects for strong sales gains have induced major foreign automakers to increase their presence in India."
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