Global automotive sales to hit record highs in 2011: Scotia Economics

The recovery in global auto sales that began in the spring of 2009 and accelerated over the past year will likely lift volumes to record highs in 2011, according to the Global Auto Report released by Scotia Economics.

China, India and Russia will lead the way, but the U.S. market is also expected to post its second consecutive double-digit increase in the coming year – a development that has not occurred since the early 1980s, the report says.

The recovery in global car sales has shifted gears and will increasingly be driven by improving labour markets. According to Scotia Economics, the pace of job creation – and not the level of unemployment – is the key driver of global car sales, and "the ongoing improvement should enable the United States and the euro zone to climb out of their deep hole." The report also attributes growth to increased auto lending across the globe.

In addition, improving global job growth – currently at about two percent year-over-year – leaves potential new vehicle buyers better equipped to deal with ongoing concerns about the sluggish pace of the U.S. economic recovery, as well as with persistent sovereign debt problems emanating from Western Europe. Job creation is being led by growth of four percent year-over-year in the BRIC nations.

China became the largest auto market in 2009, surpassing sales in the United States. Purchases soared an additional 30 percent over the past year, leading the global auto recovery. In 2011, new car sales in China and the other BRIC nations will surpass the combined volumes of Western Europe and Japan, and account for roughly 30 percent of global car sales, the report says.

India was the second-best performing major auto market over the past decade, with car sales climbing to a record 1.84 million units in 2010.

Car sales in Russia soared by roughly 30 percent in 2010, and will likely continue to post double-digit gains in 2011, as government scrappage incentives remain in place, the report says.

Rapid credit growth and strong job creation lifted car sales in Brazil to a record 2.65 million units in 2010. A further single-digit gain is expected in 2011, as economic growth moderates alongside higher interest rates.

Purchases in Western Europe have also started to stabilize, with car sales in Germany bottoming in the first half of 2010. Germany accounts for about 30 percent of overall economic activity in the euro zone, and one-quarter of the region’s car sales.

Vehicle sales in the United States climbed 11 percent in 2010 to 11.5 million units, and a further double-digit gain to 12.7 million is expected for the coming year. The improvement was led by business purchases in 2010, but will be driven by strengthening retail volumes in the coming year, as Americans replace their aging vehicles.

Canadian consumers are also returning to dealerships, with enhanced incentives boosting sales by seven percent in 2010, the report reveals. A further two percent increase is projected for 2011, lifting purchases to 1.59 million units – in line with the average of the past decade.

http://www.scotiacapital.com/English/bns_econ/bns_auto.pdf