TORONTO, Aug. 31, 2017 /CNW/ - Global car sales are on target to set an eighth consecutive annual record. This represents the longest auto industry up-cycle of recent decades and reflects a broad-based strengthening in economic activity across all regions over the past year. In fact, the global economy is currently expanding at the fastest pace in more than two years, and this is leading to a re-acceleration in global sales from the moderating trend that had been in place since the partial phase-out of a sales tax incentive in China late last year.
"Record global sales stand in sharp contrast to 'peak auto' fears that have become popular with pessimists and appear regularly in media headlines," said Carlos Gomes, Senior Economist and Auto Industry Specialist, Scotiabank. "While the auto industry is cyclical, declines in global car sales have historically only occurred during economic downturns, such as in 2001, and 2008/09. Outside of those years, global auto sales have consistently moved higher."
Developing markets are leading the sales gains, with volumes (excluding China) jumping 14% y/y in July, the best performance in nearly five years. Stronger-than-expected economic growth in China is also a key contributor to the recent global sales acceleration, especially since it is being accompanied by firmer car prices and inventory normalization. These developments have prompted an upgrade of our 2017 sales forecast for China to a 3% annual gain, up from the small decline that we originally envisioned. New car sales in China are now projected to exceed 24 mn units and account for 30% of global volumes, up from 25% only three years ago.
Despite record global purchases, a temporary de-fleeting in the U.S. rental car industry has led to an 8% drop in fleet volumes in the United States this year, and will reduce overall U.S. purchases for the first time since 2009. However, strengthening consumer balance sheets and an aging vehicle fleet have enabled household volumes to remain resilient, keeping overall U.S. sales above 17 mn units for the second consecutive year, and are expected to support higher sales in 2018. Meanwhile, new vehicle pricing is at record highs, and automotive credit quality has improved alongside fewer subprime auto loans.
- Stronger-than-expected economic growth and healthy labour markets are lifting purchases in Canada and Mexico to record highs.
- Car sales also remain in expansionary mode throughout continental Europe, supported by the acceleration in economic growth to a decade-high.
- Car sales in South America have jumped 12% this year, the strongest gain since the global economic recovery was in its infancy.
- While China has been the key driver of Asian volumes in recent years, purchases have also accelerated in region during 2017 alongside strengthening economic activity, and will climb above 13 mn units this year.
Read the full Scotiabank Global Auto Report online at:
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