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Global Economic Research October 4, 2012
Global Auto Report
Carlos Gomes (416) 866-4735
carlos.gomes@scotiabank.com
Global Auto Production Revs Up
— Assemblies Are Picking Up In Every Region, Except Western Europe
AS AUTO SALES ADVANCE …
G lobal vehicle sales increased a healthy 8% y/y in July and
August, led by double-digit gains in South America in response
to a US$10 bn stimulus package in Brazil. Purchases also continue to
90
Global Vehicle Production Ramps Up
millions of units millions of units
18
gain momentum in China, with volumes advancing 11% above a year 80 16
earlier in August. However, purchases in the rest of Asia have Global
70 14
softened, held back by lower sales in India. More recently, activity in
Japan edged down year-over-year in September, undercut by the end 60 12
of government subsidies for eco-friendly vehicles.
North America
In the United States, passenger vehicle sales continue to gain 50 10
momentum, with purchases revving up to an annualized 14.9 million
40 8
units in September — the highest level since March 2008, and well above
the average of 14.2 million units during the previous eight months. 30 6
Despite a sluggish labour market, consumers are taking advantage of 08 09 10 11 12 13
record-low auto loan rates to replace their aging vehicles with more fuel-
efficient models. As a result, sales of small cars surged 43.5% y/y in September, and mid-size cars advanced
17.5%. If not for lean inventory of some models, such as the Ford Fusion which had only 28 days’ supply at the
end of August — less than half the industry average — sales of mid-size cars might have been stronger.
Sales also remain solid in Canada, advancing 6% y/y last month, and climbing to the second-highest level on
record for the month of September. We estimate that purchases totalled an annualized 1.67 million units last
month, in line with the average of the past year. As in previous months, foreign nameplates led the way in
September, with volumes surging 12% above a year earlier and capturing 56% of the Canadian new vehicle
market. Since 2008, these manufacturers have consistently garnered a majority of Canadian sales.
…GLOBAL VEHICLE PRODUCTION REBOUNDS
After a summer lull that added to the manufacturing doldrums of recent months, auto assembly plants
have started to ramp up across most of the world and will provide a significant boost to manufacturing and
overall economic activity in the final quarter of 2012. Russia and Brazil will lead the way, with vehicle
assemblies in both nations scheduled to post double-digit year-over-year increases. However, every region
except Western Europe is expected to post solid output gains in coming months, helping to revive global
manufacturing activity.
Assemblies in South America are likely to climb more than 15% y/y in the final months of 2012, underpinned
by the recent strength in new car demand in Brazil. Car sales in Brazil have soared by more than 20% y/y in
recent months and vehicle production set a record high in August. The recent auto revival in Brazil is being driven
by government stimulus, and represents a sharp reversal from developments in the opening months of 2012 when
vehicle assemblies slumped by more than 50% y/y through April. The rebound in sales and production will boost
economic activity, as the auto sector accounts for nearly 4% of overall GDP in Brazil.
This report has been prepared by Scotia Economics as a resource for the clients of Scotiabank.
Scotia Economics Opinions, estimates and projections contained herein are our own as of the date hereof and are
Scotia Plaza 40 King Street West, 63rd Floor subject to change without notice. The information and opinions contained herein have been
compiled or arrived at from sources believed reliable but no representation or warranty, express
Toronto, Ontario Canada M5H 1H1
or implied, is made as to their accuracy or completeness. Neither Scotiabank nor its affiliates
Tel: (416) 866-6253 Fax: (416) 866-2829 accepts any liability whatsoever for any loss arising from any use of this report or its contents.
Email: scotia.economics@scotiabank.com TM
Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Global Auto Report is available on: www.scotiabank.com, Bloomberg at SCOE and Reuters at SM1C
Global Economic Research October 4, 2012
Global Auto Report
The auto industry in Russia has been a consistent popular Chevrolet Equinox. The plant assembled only 2,000
outperformer, as global automakers seek to increase their vehicles in September, but will be ramping up production to
presence in the world’s largest country. Vehicle production in roughly 4,000 units per month during the fourth quarter.
Russia surged 42% last year and has jumped an additional 16%
Other automakers including Ford, VW, Hyundai and Nissan
y/y through August, leaving the industry on target to reach a full-
have also recently added third shifts at several facilities, especially
year record of 2.3 million units in 2012 and surpass assemblies in
in the U.S. south. Further production increases are scheduled for
France. As recently as 2006, vehicle production in France was
the New Year, as foreign automakers shift production to North
double the level prevailing in Russia. Further solid gains are
America. For example, Toyota is hiring additional workers for
expected in coming years, as automakers plan to boost their
both of its Canadian facilities and will be ramping up production
assembly capacity in Russia by more than 10% through mid-
early next year. Capacity at the Cambridge, Ontario facility is
decade. While local brands still account for two-thirds of overall
being increased by 30,000 units per annum, while the Woodstock
vehicle production in Russia, assemblies by Volkswagen, GM
facility, which produces the popular RAV4 crossover utility, will
and Ford have surged in excess of 50% this year.
expand by 50,000 units in early 2013.
The improvement in vehicle production across North In contrast, sales in Western Europe continue to deteriorate.
America will help bolster manufacturing prospects at a Preliminary sales results for September point to at least a
time when durable goods orders in other sectors have been 15% slump across the region — double the 7.5% decline
weak. The U.S. ISM manufacturing index expanded in through August. Even prior to the double-digit downturn in
September for the first time since May, and will be September, French and Italian automakers had announced work
supported going forward by the ramp up of North stoppages up to three weeks due to weak demand. Only
American car and truck output to an annualized 15.6 German automakers, BMW, VW and Audi are likely to raise
million units in the final quarter of 2012, up from a low of fourth-quarter assemblies above a year earlier due to strong
less than 15.0 million units in August. In fact, given stronger-
demand. All three manufacturers are posting solid gains in
than-expected sales in the United States in recent months,
emerging markets, while VW is also benefitting from a higher
automakers have boosted their production schedule by 85,000
market share in Western Europe.
units, roughly 2.5%, over the past month.
Compounding the pain for most European mass market
Automakers are once again running their plants at full tilt, with
automakers is the loss of market share to Asian manufacturers,
several facilities either adding a third shift or scheduling overtime
which in some cases have limited production in Europe. For
for the next several months to ensure that the industry has enough
example, sales of South Korean automakers Hyundai and Kia
supply on hand to meet stronger-than-expected demand. General
have advanced by 16% this year, garnering 6% of the Western
Motors will lead the production gains in North America in the
European market. However, these manufacturers do not
fourth quarter, partly due to the recent re-opening of its Spring
produce vehicles in Western Europe, but export to the region
Hill, Tennessee plant in September to add capacity to produce the
from their facilities in the Czech Republic and Slovakia.
International Car Sales Outlook
1990-99 2000-08 2009 2010 2011 2012f
(millions of units)
TOTAL SALES 39.20 49.55 50.42 56.82 58.89 61.96
North America* 16.36 19.01 12.61 13.96 15.22 16.77
Canada 1.27 1.60 1.46 1.56 1.59 1.68
United States 14.55 16.39 10.40 11.55 12.73 14.10
Mexico 0.54 1.02 0.75 0.85 0.90 0.99
Western Europe 13.11 14.48 13.62 12.98 12.80 11.66
Germany 3.57 3.28 3.81 2.92 3.17 3.08
Eastern Europe 1.18 2.73 2.58 3.14 3.90 4.33
Russia 0.78 1.54 1.47 1.91 2.65 3.05
Asia 6.91 10.97 17.68 22.47 22.50 24.54
China 0.43 3.14 7.32 9.41 10.04 10.94
India 0.31 0.83 1.43 1.87 1.95 2.05
South America 1.64 2.36 3.93 4.27 4.47 4.66
Brazil 0.94 1.46 2.53 2.69 2.64 2.75
*Includes light trucks.
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Global Economic Research October 4, 2012
Global Auto Report
Canada/U.S. Motor Vehicle Sales Outlook
1991-05 2006-09 2010 2011 2012
Average Jan-Jul ** Annual f
(thousands of units, annualized)
CANADA 1,398 1,592 1,557 1,589 1,693 1,680
Cars 797 841 711 691 767 760
Domestic 583 527 394 433 481 470
Transplants 178 278 235 257 285 288
Imports 214 314 317 258 286 290
Light Trucks 601 751 846 898 926 920
(millions of units, annualized)
UNITED STATES 15.5 14.0 11.6 12.7 14.2 14.1
Cars 8.3 6.9 5.7 6.1 7.2 7.1
Light Trucks 7.2 7.1 5.9 6.6 7.0 7.0
(millions of units, annualized)
NORTH AMERICAN
PRODUCTION* 15.58 13.25 12.15 13.43 15.58 15.60
CANADA 2.50 2.18 2.07 2.13 2.43 2.50
UNITED STATES 11.67 9.10 7.74 8.61 10.25 10.10
MEXICO 1.41 1.97 2.34 2.69 2.90 3.00
*Includes transplants; light, medium and heavy trucks. **U.S. sales and North American production to September.
Vehicle Sales Outlook By Province*
(thousands of units, annual rates)
1994-05 2006-09 2010 2011 2012
Average Jan-Jul Annual f
CANADA 1,446 1,592 1,557 1,589 1,693 1,680
ATLANTIC 102 117 122 119 122 123
CENTRAL 936 983 990 997 1,055 1,047
Quebec 366 406 414 408 418 420
Ontario 570 577 576 589 637 627
WEST 408 492 445 473 516 510
Manitoba 42 44 44 47 50 50
Saskatchewan 36 44 46 50 55 54
Alberta 166 225 200 218 240 237
British Columbia 164 179 155 158 171 169
*Includes cars and light trucks.
275 275 70 70
800 800 thousands of units thousands of units
thousands of units
250 250
Alberta
700 700 60 60
225 225
Ontario Manitoba
600 600 200 200
British 50 50
175 Columbia 175
500 500
150 150
Quebec 40 40
400 400 125 125
100 100 30 30
300 300
75 75 Saskatchewan
Atlantic
200 200 50 50 20 20
80 84 88 92 96 00 04 08 12 80 84 88 92 96 00 04 08 12 80 84 88 92 96 00 04 08 12
Includes cars and trucks (light, medium and heavy).
Shaded bars indicate U.S. recession periods.
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Global Economic Research October 4, 2012
Global Auto Report
Auto Market Share By Manufacturer — Canada*
(thousands of units, not seasonally adjusted)
2011 2012 2011 2012
Jan to Sep Jan to Sep Sep Sep
Units % of Total Units % of Total Units % of Total Units % of Total
TOTAL 544.0 100.0 595.8 100.0 57.1 100.0 65.7 100.0
Big Three 148.2 27.2 146.1 24.5 13.2 23.1 14.5 22.1
General Motors 63.5 11.7 56.8 9.5 4.9 8.5 5.9 9.0
Ford 58.3 10.7 55.1 9.3 5.7 9.9 5.0 7.6
Chrysler 26.4 4.8 34.2 5.7 2.6 4.7 3.6 5.5
Japanese 214.1 39.4 245.3 41.2 23.3 40.8 27.3 41.6
Honda 51.8 9.5 62.4 10.5 6.3 11.0 7.4 11.3
Toyota 63.0 11.6 83.9 14.1 7.5 13.2 8.9 13.5
Nissan 37.6 6.9 34.5 5.8 3.2 5.6 3.3 5.0
Mazda 44.9 8.3 45.0 7.6 4.7 8.3 5.6 8.6
Mitsubishi 5.7 1.0 6.0 1.0 0.6 1.1 0.6 1.0
Subaru 8.3 1.5 10.9 1.8 0.7 1.1 1.2 1.8
Hyundai 71.4 13.1 77.8 13.1 8.1 14.2 8.6 13.2
Volkswagen 34.4 6.3 38.6 6.5 4.2 7.3 4.8 7.3
Kia 32.7 6.0 43.7 7.3 3.7 6.5 5.0 7.5
BMW 15.6 2.9 16.1 2.7 1.6 2.8 2.4 3.6
Mercedes-Benz 15.3 2.8 15.4 2.6 1.6 2.8 1.7 2.5
Other 12.3 2.3 12.8 2.1 1.4 2.5 1.4 2.2
*Source: Dealer sales from the Association of International Automobile Manufacturers of Canada.
Truck Market Share By Manufacturer — Canada*
(thousands of units, not seasonally adjusted)
2011 2012 2011 2012
Jan to Sep Jan to Sep Sep Sep
Units % of Total Units % of Total Units % ot Total Units % of Total
TOTAL 703.8 100.0 739.4 100.0 80.9 100.0 80.5 100.0
Big Three 441.2 62.7 443.8 60.0 48.5 60.0 47.4 58.9
General Motors 123.5 17.5 119.3 16.1 11.9 14.8 12.8 16.0
Ford 161.0 22.9 164.1 22.2 20.0 24.7 18.6 23.1
Chrysler 156.7 22.3 160.4 21.7 16.6 20.5 16.0 19.8
Other Domestic 25.0 3.6 31.2 4.2 3.6 4.5 3.2 4.0
Japanese 142.5 20.2 167.8 22.7 17.8 22.0 19.2 23.8
Honda 36.4 5.2 47.2 6.4 4.8 6.0 5.5 6.8
Toyota 56.0 8.0 64.4 8.7 6.3 7.7 8.0 9.9
Nissan 28.1 4.0 30.5 4.1 3.9 4.9 2.9 3.6
Mazda 8.9 1.3 12.8 1.7 1.1 1.4 1.1 1.4
Mitsubishi 9.7 1.4 8.9 1.2 1.1 1.4 1.1 1.4
Subaru 11.9 1.7 11.6 1.6 1.6 1.9 1.5 1.9
Hyundai 32.7 4.6 29.8 4.0 3.0 3.7 2.8 3.5
Kia 18.9 2.7 18.0 2.5 2.7 3.3 2.1 2.6
Other Imports 43.5 6.2 48.8 6.6 5.3 6.5 5.8 7.2
LIGHT TRUCKS 682.2 96.9 710.4 96.1 77.6 95.9 76.9 95.6
*Source: Dealer sales from the Association of International Automobile Manufacturers of Canada.
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Global Economic Research October 4, 2012
Global Auto Report
Auto Sales By Province
(thousands of units, not seasonally adjusted)
2011 2012 2011 2012
Jan to Jul Jan to Jul Jul Jul
CANADA 425.3 463.0 62.9 63.2
ATLANTIC 35.1 38.6 5.3 5.3
Newfoundland 7.9 8.8 1.2 1.3
Nova Scotia 15.0 16.2 2.3 2.1
New Brunswick 10.5 11.5 1.5 1.6
Prince Edward Island 1.7 2.1 0.3 0.3
CENTRAL 301.4 325.3 44.2 44.3
Quebec 139.9 145.4 20.4 19.7
Ontario 161.5 179.9 23.8 24.6
WEST 88.8 99.1 13.4 13.6
Manitoba 9.4 10.0 1.5 1.5
Saskatchewan 7.2 7.8 1.2 1.1
Alberta 32.3 36.1 4.8 5.1
British Columbia 39.9 45.2 5.9 5.9
Truck Sales By Province*
(thousands of units, not seasonally adjusted)
2011 2012 2011 2012
Jan to Jul Jan to Jul Jul Jul
CANADA 542.6 575.3 81.3 88.2
ATLANTIC 39.1 41.3 6.1 6.6
Newfoundland 10.7 11.8 1.7 1.9
Nova Scotia 13.1 14.2 2.0 2.2
New Brunswick 13.6 13.3 2.1 2.1
Prince Edward Island 1.7 2.0 0.3 0.4
CENTRAL 311.9 318.7 46.0 48.7
Quebec 112.3 112.8 16.9 16.8
Ontario 199.6 205.9 29.1 31.9
WEST 191.6 215.3 29.2 32.9
Manitoba 18.5 20.5 2.9 3.2
Saskatchewan 21.8 24.7 3.3 3.9
Alberta 96.3 109.0 14.6 16.4
British Columbia 55.0 61.1 8.4 9.4
*Light, medium and heavy trucks.
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Global Economic Research October 4, 2012
Global Auto Report
Canadian Motor Vehicle Production*
(thousands of units, not seasonally adjusted)
2011 2012 2011 2012
Jan to Aug Jan to Aug Aug Aug
TOTAL 1,383.2 1,655.1 193.2 231.6
CAR 658.1 700.4 92.3 96.5
Chrysler 128.3 157.9 14.6 22.5
Ford 72.6 0.0 9.9 0.0
GM 218.7 211.6 33.1 33.4
Honda 100.2 157.1 11.2 17.6
Toyota 138.3 173.8 23.5 23.0
TRUCKS** 725.1 954.7 100.9 135.1
CAMI (GM/Suzuki) 0.0 0.0 0.0 0.0
Chrysler 197.7 231.9 31.2 36.4
Ford 156.9 164.7 21.2 23.3
GM 225.8 246.4 34.7 33.4
Honda 34.0 121.2 4.1 17.7
Toyota 105.0 183.6 8.6 23.3
Others 5.7 6.9 1.1 1.0
*Production data from Ward’s Automotive Reports. **Light, medium and heavy trucks.
Canada — Motor Vehicle Production Canada — World Auto Trade Balances
3.4 3.4 50 50
quarterly billions of dollars
3.0 3.0 40 40
Total Assembled vehicles
2.6 2.6 30 30
2.2 2.2 20 20
Total
1.8 1.8 10 10
Cars
1.4 1.4 0 0
1.0 1.0 -10 -10
Parts
Trucks*
0.6 0.6 -20 -20
0.2 0.2 -30 -30
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Millions of units, seasonally adjusted annual rates. 2012 data are January-July annualized.
* Light, medium and heavy trucks.
6
Global Economic Research October 4, 2012
Global Auto Report
New & Used Car Prices
Scotiabank Car Price Indicators — Canada
year-over-year per cent change
25 25
Used*
15 New 15
5 5
CPI
-5 -5
-15 -15
79 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
* Scotiabank estimate from Canadian Black Book data.
Scotiabank Car Price Indicators — Canada
20 20
thousands of dollars by age of car, seasonally adjusted
18 18
16 16
14 14
12 1 Year 12
10 10
8 8
2 Year
6 6
4 4 Year 4
2 2
79 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Scotiabank estimate from Canadian Black Book data.
Scotiabank Car Price Indicators — United States
year-over-year per cent change
25 25
15 Used 15
5 CPI 5
New
-5 -5
-15 -15
79 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12
Consumer price indices for new and used cars.
Shaded areas indicate recession periods.
7
Global Economic Research October 4, 2012
Global Auto Report
Canadian Corporate Financial Performance
Motor Vehicle Dealers and Repair Shops
Net Income Pre-Tax Inventory Interest Debt/ Return on
After Tax Profit Turnover Coverage Equity Shareholders
($ mil) Margin (%) Ratio Ratio Ratio Equity (%)
Annual 1999 487 0.82 6.83 2.31 2.41 9.58
2000 400 0.75 6.79 2.10 2.02 6.46
2001 521 0.75 7.06 2.13 1.98 8.37
2002 773 1.02 7.48 3.09 2.04 11.28
2003 594 0.91 5.30 2.65 2.91 10.14
2004 571 0.69 4.98 2.25 3.17 10.49
2005 799 0.93 5.35 2.55 2.74 12.90
2006 942 1.20 5.16 2.64 2.75 14.37
2007 1089 1.41 5.05 3.36 2.56 15.13
2008 1142 1.43 5.04 3.51 2.44 14.66
2009 1392 1.84 5.34 4.85 2.07 16.99
2010 1645 2.05 4.98 5.33 2.15 18.61
2011 1939 2.21 4.91 5.08 1.77 17.65
Quarterly at annual rates
2011Q2 1780 2.04 5.14 5.56 1.83 16.85
Q3 1816 1.89 5.01 4.08 1.75 16.19
Q4 2948 3.20 5.20 6.05 1.58 24.19
2012Q1 2452 2.80 4.39 5.63 1.69 19.73
Q2 2680 2.81 4.73 6.03 1.64 20.78
Average (89-11) 686 1.14 6.20 2.79 2.39 10.78
Low (89-11) -68 0.10 4.30 1.10 3.57 -1.20
Definition of Ratios: Interest Coverage Ratio: (pre-tax income and interest payments)/(interest payments)
Pre-tax Profit Margin: pre-tax income/sales Debt/Equity Ratio: (short-term and long-term debt)/total equity
Inventory Turnover Ratio: sales/inventory Return of Shareholders’ Equity: after-tax income/total equity
Retail Auto Dealer Bankruptcies
30 30
number of bankruptcies
25 25
2012
20 2011 20
2010
15 15
10 10
5 5
0 0
Jan. Feb. Mar. Apr. May June July Aug. Sept. Oct. Nov. Dec.
New car dealers only; cumulative total during the year.
8
