The Canadian auto market appears to be an oasis of calm among the turbulent seas of the global auto market, according to the latest Global Auto Report released by Scotia Economics. Purchases have advanced by 1.4 per cent through September compared with a 13 per cent slump in the United States and a five per cent fall-off in Western Europe.
“The relative calm in Canada reflects significant price reductions by automakers since last fall when the Canadian dollar reached parity with the U.S. currency, as well as a sharp shift towards lower-priced subcompact cars, especially models priced under CAD$10,000,” said Carlos Gomes, Scotiabank Senior Economist and Auto Industry Specialist. “However, developments arising from the current global financial crisis point to a much tougher environment for automakers and dealers in 2009.”
This year’s increase in Canadian vehicle sales has been almost entirely due to a 25 per cent surge in purchases of subcompact cars. Subcompacts now account for a record nine per cent of the Canadian market, up from roughly five per cent during the previous five years. The shift to smaller, less-expensive vehicles, combined with price cuts introduced after the Canadian dollar reached parity with the U.S. currency late last year has reduced the cost of purchasing a new vehicle in Canada by 9.3 per cent year-over-year as of September, the largest drop since February 1956.
The decline in vehicle prices has been largest in Atlantic Canada and Saskatchewan, dropping by more than 11 per cent so far this year. Households in these provinces have responded, with purchases posting double-digit gains through September, leading the advance across Canada.
Aside from small cars, crossover utility vehicles are the only other segment to post gains in Canada this year, with purchases advancing by nine per cent.
While data on vehicle profitability is not available for Canada, applying estimates from the United States suggests that despite rising sales so far this year, the shift to smaller, less-expensive vehicles has likely reduced auto industry profitability in Canada by more than four per cent.
“We estimate that the shift to subcompacts has reduced industry margins to the lowest level in three years. Further significant margin deterioration is expected in 2009, with vehicle sales likely to weaken by roughly six per cent to about 1.57 million units,” added Mr. Gomes. “The sharp drop in the Canadian dollar since late July against both the U.S. dollar and Japanese yen, will also intensify pressure on automakers and dealers, who will be unable to push through price increases in 2009.”
Global Auto Sales fall further in September
Global vehicle sales weakened in September, as the expanding financial crisis internationally eroded the cushion provided by emerging markets.
In the United States, the epicentre of the global economic and auto market slowdown, passenger vehicle sales tumbled 27 per cent year-over-year last month, reducing volumes to less than one million units for the first time since the early 1990s. On an annualized basis, purchases totalled 12.5 million units in September, down from an average of 14.3 million during the previous eight months.
“Sales weakened sequentially through the month, as the turmoil in the financial markets restricted the availability of credit. In fact, tightening credit and a slowing economy have displaced fuel costs as the driving force behind slumping U.S. vehicle sales,” said Mr. Gomes. “We expect purchases to continue to weaken into 2009 and have reduced our full-year 2008 and 2009 sales forecasts to 13.7 million and 13.5 million respectively, compared with an average of 16.7 million over the past decade.”
In contrast to the turmoil south of the border, Canadian vehicle sales picked up last month, climbing two per cent above a year earlier, a significant improvement from a seven per cent decline in August.
What it means
Shrinking margins, unprofitable subcompacts, currency volatility, “a much tougher environment for automakers and dealers in 2009” – interesting headlines here… The October sales numbers will tell it as it is, but we just may see another surprise as the Canadian market is in much better shape than most, especially when compared with the US.
STRATEGIC/MACRO DAILY INFORMATION for Canadian automotive business
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Monday - Feb. 06, 2012
FOCUS: GM aims for 10 percent profit margin over next few years: report - Reuters
ECONOMIC FUNDAMENTALS: Chinese economic growth at risk from European downturn - Guardian
ECONOMIC FUNDAMENTALS II: Greece lets another deadline slip in bailout poker - Reuters
CANADA
GM, Bullfrog team to make Volt greener - ReportonBusiness
OAS battle no retirement crisis - FinancialPost
INTERNATIONAL
Chrysler draws praise for Clint Eastwood ad touting U.S. turnaround - Det.News
US: Dealer Calls for Auto Makers to Boost Margins - Wards
World Car of the Year: The top 10 - Telegraph
Suzuki Motor 9-month profit dips - MarketWatch
GM doesn't pull Super Bowl ad that tweaks Ford - Det.News
Friday - Feb. 03, 2012
FOCUS: Toyota expects global 2012 sales to rise 21% - MarketWatch
ECONOMIC FUNDAMENTALS: China cabinet economist warns of "deflation" in 2012 - Reuters
CANADA
Ottawa leans on banks to tighten lending - ReportonBusiness
Canada's jobless rate rises - FinancialPost
INTERNATIONAL
Toyota's January China sales down 25% - MarketWatch
South Korea to get more Fords - Det.News
Major South American Markets Saw Mostly Positive Results in 2011 - Wards
Daimler's Mercedes-Benz Jan. global sales up 5.8% - MarketWatch
Thursday - Feb. 02, 2012
FOCUS: USA: Consumer demand, optimistic economic signals help Jan. auto sales - Det.News
ECONOMIC FUNDAMENTALS: Worst yet to come for China growth: economist - Reuters
CANADA
Canadian auto-parts makers see green opportunity in India - ReportonBusiness
Canadian auto sales jump 15 per cent in January - TheStar
Canadian pension plan eyes Australia investments - MarketWatch
INTERNATIONAL
Chrysler profit means $1,500 bonus for employees - Det.News
Washington Stands Behind Claims of 54.5 MPG Fuel Rules - Wards
Mitsubishi Motors swings back to profit - MarketWatch
Indiana's electric-vehicle bust - Det.News
Wednesday - Feb. 01, 2012
FOCUS: Chrysler's U.S. January sales top 101,000 - MarketWatch
ECONOMIC FUNDAMENTALS: German jobs miracle as Latin unemployment soars - Telegraph
ECONOMIC FUNDAMENTALS II: Hedge funds brace for euro zone break-up - Reuters
CANADA
Canada-EU trade deal a hopeful sign - FinancialPost
Is Old Age Security truly unsustainable? - CBC
INTERNATIONAL
Electric Cars: Doubling Down On Dumb - RealclearMarkets
Chrysler ends robust '11 with $183M profit - Det.News
Double-Digit Production Gains Forecast for North America in 2012 - Wards
Toyota reports robust orders for Aqua hybrid - MarketWatchTuesday - Jan. 31, 2012
FOCUS: Japanese suppliers, execs to pay $548M in price fixing - Det.News
ECONOMIC FUNDAMENTALS: Euro-zone Dec. jobless rate at record 10.4% - MarketWatch
ECONOMIC FUNDAMENTALS II: Europe signs up to German-led fiscal pact - Reuters
CANADA
Did Quebec's fall jobs rout really happen? - FinancialPost
Warning: Debt binge a danger to financial health - ReportonBusiness
INTERNATIONAL
Hyundai Mobis reports new GM, Chrysler contracts - MarketWatch
Treasury ups auto bailout loss estimate - Det.News
Small XV Crosstrek Expands Subaru Lineup - Wards
UK: Ford's 1.0-litre Focus goes on sale - Telegraph
Honda's quarterly profit falls 41% on strong yen - MarketWatch
Monday - Jan. 30, 2012
FOCUS: EU car makers slam India free-trade pact - MarketWatch
ECONOMIC FUNDAMENTALS: EU leaders struggle to reconcile austerity, growth - Reuters
CANADA
Austerity budget is coming, but is this the right time? - ReportonBusiness
Canada downgraded, relations with the U.S. at lowest point in 25 years - FinancialPost
INTERNATIONAL
In Beetle's creation story, a plot twist - Det.News
Hyundai Reticent to Tout Hybrids; Stop/Start Uncertain - Wards
Honda out to shake up market with first jet next year - Reuters
Car-buying tips men can learn from women - MarketWatch
Britain's auto industry rising from the grave - TheStar
Despite strong '11, Ford cautious - Det.News
Friday - Jan. 27, 2012
FOCUS: Ford Motor Co. earns $20.2 billion in 2011 - Det.News
ECONOMIC FUNDAMENTALS: Investors fear mounting losses in Portugal as second rescue looms - Telegraph
CANADA
Does Harper really need to raise the retirement age? - ReportonBusiness
Borrowing Boomers pile on more debt - MoneyVille
INTERNATIONAL
Ford net jumps; operating profit lags estimate - MarketWatch
Jobs, Jobs and Cars - NYTimes
GM: Bad publicity hurt Volt - Det.News
New Chevy Window Sticker Details Cradle-to-Grave Environmental Impact - Wards
Kia targets 2012 sales growth to slow to 9.5% - MarketWatch
Thursday - Jan. 26, 2012
FOCUS: Hyundai Motor posts 38% rise in Q4 net profit - MarketWatch
ECONOMIC FUNDAMENTALS: THE SEEDS OF DYSTOPIA: Roubini & Co. Scare The Crap Out Of Davos - BusinessInsider
ECONOMIC FUNDAMENTALS II: Bernanke has "finger on trigger" for new bond buys - Reuters
CANADA
Canadian jobs quality worsened in 2011: CIBC report - TheStar
Canada imports oil while battling over pipeline exports - CBC
INTERNATIONAL
Ford: Fusion isn't chasing Camry - Det.News
Nissan, Partners Explore Afterlife of EV Batteries - Wards
MG makes a return to racing - Telegraph
Crude oil edges above $100 a barrel - MarketWatch
Fiat-Chrysler in talks to produce Jeeps in China - Det.News
Wednesday - Jan. 25, 2012
FOCUS: Car makers work to sort out mess in Europe - Det.News
ECONOMIC FUNDAMENTALS: Forget Greece; it's Portugal that'll destroy euro - MarketWatch
CANADA
Two major Canadian unions, CAW and CEP, exploring merger by mid-2013 - TheStar
More Canadians in low-paying jobs - ReportonBusiness
INTERNATIONAL
Audit rips exec pay in bailouts - Det.News
GM International Chief Sees Remedy for European Ops as Sales Soar Elsewhere - Wards
Opel Talking with SAIC Regarding China Sales Expansion - ChinaCarTimes
GM CEO to Congress: Volt is safe - Det.News
Tuesday - Jan. 24, 2012
FOCUS: European Debt Won't ‘Put Brakes on the World,' Ford Executive Says - Wards
ECONOMIC FUNDAMENTALS: Worries Portugal may need second bailout: WSJ - MarketWatch
ECONOMIC FUNDAMENTALS II: Euro zone may skirt recession as PMIs surprise - Reuters
CANADA
Signs augur well for Canadian entry in TPP: Trade Minister - ReportonBusiness
Carney warns U.S. may never fully recover - CBC
INTERNATIONAL
Auto bankruptcies weighed early - Det.News
The art of the supercar - Telegraph
Volkswagen Aims to Combine With Porsche as Soon as Economically ‘Sensible' - Bloomberg
Congress yet to OK electric auto agenda - Det.News
Monday - Jan. 23, 2012
FOCUS: OPEC: $100 oil acceptable to producers, consumers - MarketWatch
ECONOMIC FUNDAMENTALS: Davos guide: what you need to know about the World Economic Forum - Guardian
CANADA
Stalled on the road to economic recovery - ReportonBusiness
INTERNATIONAL
Hyundai rattles Volkswagen in Europe after winning in U.S. - Det.News
Momentum Builds for Chrysler Design Team - Wards
Toyota to cut 350 jobs at Australian plant - MarketWatch
GM Faces Task of Rebuilding Volt Image After NHTSA Ends Its Investigation - Bloomberg
Friday - Jan. 20, 2012
FOCUS: GM again world's largest on strong Chevy sales - Det.News
ECONOMIC FUNDAMENTALS: Shilling says new global recession is here - MarketWatch
ECONOMIC FUNDAMENTALS II: Factbox: What happens if Greece defaults? - Reuters
CANADA
Annual inflation falls sharply to 2.3% - ReportonBusiness
Who knew? Toronto's economy is on fire - FinancialPost
INTERNATIONAL
GM picks N.Y. man's ad to air during Super Bowl - Det.News
Mazda3 Hints at Things to Come - Wards
UK: Ten most expensive cars to insure - Telegraph
Chrysler, GM wait on raises, bonuses - Det.News
Thursday - Jan. 19, 2012
FOCUS: Science panel backs closing of Toyota acceleration probe - DetroitNews
ECONOMIC FUNDAMENTALS: IMF sees euro zone GDP down 0.5 percent in 2012: ANSA - Reuters
CANADA
Don't settle for new 'natural' jobless rate of 7 per cent - ReportonBusiness
BOC's Mark Carney puts a price tag on global turmoil - TheStar
Living the American dream -- in Canada - MarketWatch
INTERNATIONAL
Akerson to testify in Volt probe - DetroitNews
Saab: a celebration - Telegraph
Honda's Plan To Manufacture Supercars In America Is A Gamechanger - BusinessInsider
Renault has no plans to sell Volvo stake: report - MarketWatch
Kia Stop/Start Stalls - Wards
Wednesday - Jan. 18, 2012
FOCUS: Average age of cars, trucks hits 10.8 years, sets record - DetroitNews
ECONOMIC FUNDAMENTALS: IMF explores $1 trillion lending boost - MarketWatch
ECONOMIC FUNDAMENTALS II: Hungary faces ruin as EU loses patience - Telegraph
CANADA
Federal budget may be delayed by European woes - CBC
Flaherty watching risky debt as Carney leaves BOC interest rate at 1 per cent - TheStar
INTERNATIONAL
Toyota sets high Korean target for Camry sales - MarketWatch
Lotus's Incoming Malaysian Owner Says It's Open to Selling Sports Carmaker - Bloomberg
Mercedes to Ponder Engine Exports From U.S. - Wards
Toyota to build 30,000 hybrid subcompacts in Feb - MarketWatch
Tuesday - Jan. 17, 2012
FOCUS: Saudis target 'triple-digit' oil price for the first time - ReportonBusiness
ECONOMIC FUNDAMENTALS: Eurozone's 'big bazooka' bail-out fund is left in tatters by S&P downgrade - Telegraph
CANADA
Canada: A global energy superpower - FinancialPost
Euro woes temper growth: Mark Carney - ReportonBusiness
INTERNATIONAL
Fiat, Peugeot Lead European Car-Sales Drop as Economy Slows - Bloomberg
Public hearing in Detroit to address fuel economy standards - DetroitNews
Mini and Chrysler Recall Vehicles for Electronic Flaws - WSJ
Denso Growth Heats Up - Wards
Monday - Jan. 16, 2012
FOCUS: Today's youth a tough sell for automakers - DetroitNews
ECONOMIC FUNDAMENTALS: IMF: European outlook grim; high global risks - MarketWatch
ECONOMIC FUNDAMENTALS II: UK back in recession and no interest rates rise 'until 2016' - Telegraph
CANADA
Carney set to keep powder dry, stand pat on rates - ReportonBusiness
INTERNATIONAL
Saab Owners Still Rallying To Support Brand - WSJ
Billionaire Syed Mokhtar's DRB-Hicom to Buy Control of Lotus-Owner Proton - Bloomberg
Opel to Unveil New Mokka Small CUV in Geneva - Wards
GM Vice Chair Stephens to retire on April 1 - DetroitNews
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