The auto sector is the largest manufacturing industry in the United States and Canada and its stability and future viability are crucial in ensuring the health of both economies, according to the latest Global Auto Report released by Scotia Economics.
The auto industry accounts for 13.5 per cent of overall Canadian manufacturing and more than seven per cent of factory output in the United States. However, in regions such as Ontario and Michigan, the auto industry is even more crucial. The sector dominates the Ontario economy, accounting for 26 per cent of manufacturing output and five per cent of overall economic activity.
“Aside from manufacturing, there are also roughly two million people in Canada and the United States employed in the auto wholesale and retail channel,” said Carlos Gomes, Scotiabank Senior Economist and Auto Industry Specialist. “In the case of Canada, there are more than 3,400 auto dealerships, with the Detroit Three accounting for nearly half. In Ontario alone, there are more than 1,200 auto dealerships selling both domestic and imported models.”
An extensive and diverse quantity of inputs, including steel, plastics, metals and electronics, are required to produce motor vehicles & parts. On average, a vehicle produced in North America weighs over 4,000 pounds and contains roughly 2,600 pounds of steel. Plastics (including paint) are also key inputs for the motor vehicle industry, with each new vehicle containing nearly 550 pounds of plastics, 13 per cent of overall vehicle weight.
The auto industry is also a key source of overall investment and innovation. For example, the industry has invested more than $35 billion in Canada over the past decade, accounting for more than 17 per cent of overall manufacturing investment. In fact, since 2003, auto industry investment on machinery and equipment has averaged roughly $1,100 per vehicle assembled in Ontario, up from less than $800 during the previous six years. Investment will peak at nearly $1,300 per unit in 2008, as several automakers modernize their facilities to flexible assembly plants.
“Despite these significant investments, the sharp fall-off in vehicle demand in recent months will reduce operating rates at assembly plants across North America to roughly 76 per cent in 2008, one of the lowest levels on record,” added Mr. Gomes. “Highlighting the difficult conditions facing automakers, operating rates at the Detroit Three will likely remain below 70 per cent through the end of the decade, well below the 80 per cent rate they were facing when they began to close plants earlier this decade.”
Global Vehicle Sales
Global vehicle sales remain in the midst of a precipitous fall-off, led by sharp declines in the mature markets of the United States, Western Europe and Japan. Purchases have also lost momentum in emerging markets, which until recently cushioned the decline in global volumes. The slowdown reflects the intensifying global economic downturn and the sharp plunge in equity markets that has slashed valuations by nearly US$30 trillion over the past year, undermining household wealth and confidence.
The fall-off is steepest in the United States, with vehicle purchases plunging 32 per cent year-over-year in October to a 25-year low of 10.6 million units, down from an average of 14.1 million units during the previous nine months. Preliminary data suggest that sales remained close to this level in November as well. The drop is being reinforced by record-low U.S. consumer confidence and a rapidly deteriorating job market that will likely get even worse in the months ahead. Given the sharp contraction in demand, automakers are slashing production and have moved forward their year-end clearance sales.
In contrast to the global downturn, vehicle sales in Canada continued to advance through October, climbing two per cent year-over-year. Purchases totaled an annualized 1.64 million units last month, only marginally lower than the 1.70 million-unit average through September. European automakers posted double-digit gains, with the increase buoyed by their small car line-ups. In fact, small cars accounted for all of the increase in overall sales last month. Preliminary estimates point to some softening in Canadian purchases in November.
Used car prices, a leading indicator of new vehicle demand, are also holding up in Canada and have actually edged up in recent months, as a lower Canadian dollar has cut into the number of vehicles imported from the United States. Imports slumped 35 per cent year-over-year in October when the Canadian dollar fell below US90 cents, partly reversing the 84 per cent surge during the previous nine months.
“Nevertheless, we expect the sharp erosion in global economic conditions and equity markets will increasingly take a toll on Canadian prospects. As a result, we are reducing our 2009 Canadian new vehicle sales forecast to 1.50 million units, down from 1.67 million this year and an average of 1.60 million so far this decade,” said Mr. Gomes.
STRATEGIC/MACRO DAILY INFORMATION for Canadian automotive business
TJAAautoinfo FASTWEBLINK
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
FASTWEBILINK ARCHIVE
