On the road to record global car sales in 2012: Scotiabank Economics
TORONTO-- Global car sales advanced six percent in the first half of 2012, according to a Global Auto Report released by Scotiabank Economics. Japan and Russia are leading the way, with gains of 52 percent year over year (y/y) and 29 percent respectively. In contrast, Western Europe continues to lag, with sales set to decline to 12.2 million units in 2012 — the fifth consecutive slide and the lowest level since 1996.
"Car sales are advancing in every region, with the exception of Western Europe," said Carlos Gomes, Senior Economist and Auto Industry Specialist, Scotiabank Economics. "We expect continued gains in the second half supported by record low short and long-term interest rates in most nations, the recent acceleration in the pace of automotive lending across the globe and solid job creation in emerging markets."
North America is posting a double-digit increase in car sales, lifting purchases to the highest level since 2007. Light vehicle sales in North American have jumped 13 percent so far this year, led by a 21 percent surge in purchases by U.S. businesses, governments and rental car agencies.
"Purchases in Canada have been stronger than we expected this year, prompting us to increase our 2012 forecast to 1.68 million units, the second-highest annual total on record," added Mr. Gomes. "Automakers are currently offering both '0 percent' financing and 'employee pricing', providing discounts up to Cdn$14,000."
The improvement in Japan reflects a bounce from last year's tsunami-induced slump which slashed purchases to only 3.5 million units — the lowest level since 1986 — as well as government incentives for eco-friendly vehicles. However, gains are expected to moderate in coming months as pent-up demand subsides and demographics undercut purchases. The number of potential car buyers in Japan is declining by almost one percent per annum — the worst demographic trend among the G7.
In contrast, sales in Russia this year are on target to surpass the pre-crisis peak of 2.9 million sold in 2008. In fact, volumes in Russia are expected to overtake Germany (3.2 million this year) by mid-decade, becoming the largest market in Europe. Gains are being supported by government policies to increase auto financing, a rising middle class, record-high oil prices and below-average vehicle penetration.
Sales in China and Brazil have accelerated to double-digit gains in recent months, bolstered by government stimulus. In China, the government created a US$952 billion subsidy program for purchases of fuel-efficient cars with engines of less than 1.6 litres. Since the introduction of the program in May, car sales have advanced 14 per cent y/y, from only a one per cent increase through April.
The Mediterranean nations — Portugal, Spain, Italy and Greece — account for most of the weakness, with volumes slumping an additional 20 percent through July and accounting for two-thirds of the overall slide across Western Europe. Purchases in these debt-ridden nations have yet to hit bottom, despite plunging to an annualized 2.2 million units so far this year, from peak of 4.6 million in 2007.
However, volumes are holding up better in the rest of Western Europe despite ongoing economic weakness. Purchases in the United Kingdom have advanced for five consecutive months. Sales in the U.K. are expected to edge up to two million units in 2012, marginally ahead of last year's 1.9 million, according to the report. In Germany, declining confidence has flattened volumes this year, but there is potential for a better performance, as disposable income growth is advancing at the fastest pace since 2008 and unemployment is half the level prevailing in the euro zone.
Scotiabank 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.