1. travel
2. tourist destinations
3. canada

July 30, 2014
Global Economics
Global Auto Report
Carlos Gomes (416) 866-4735
[email protected]
On The Road To Record Global Car Sales In 2014
— Strengthening Employment Growth And Improving Financial Conditions Drive Gains
Global car sales advanced 4% in the first half of 2014 and will
climb to a record high this year. Purchases are being boosted by
strengthening global job creation and industrial activity, as well as
rising consumer confidence and improving financial conditions.
Despite the recent increase in geopolitical tensions in the Ukraine, the
Middle East, Africa and Asia, most economic and financial risk indicators
remain among the healthiest levels of the past decade, suggesting that
these events are unlikely to derail the global economic expansion.
In particular, after a period of significant stress last summer and in early
2014, bond yields across emerging markets have declined sharply,
including in recent weeks as tensions flared up in some of the world’s key
hot spots. As a result, emerging market spreads off U.S. Treasuries are
currently at the lowest level of the past year. In addition, after a weak
performance through mid-March, emerging market equities have
outperformed so far this year.
Global Auto Sales & Leading Indicator
18
index
millions of units
70
14
Leading
Indicator of
Global Auto
Sales
12
10
65
60
8
55
6
Global Auto
Sales
4
50
2
45
0
07
08
09
10
11
12
13
14
China Leads Sales Gains
China continues to be the main driver of rising global auto sales, with purchases of cars and CUVs advancing
15% so far this year. We expect a similar increase in the second half of 2014, as several leading indicators
of vehicle sales have quickened in recent months alongside stimulus measures introduced by Beijing.
Manufacturing activity is advancing at the fastest pace in eighteen months, while money supply growth is
picking up partly due to last month’s targeted 50 basis point reduction in the reserve requirement ratio for
financial institutions in rural areas, including firms providing consumer and auto loans. Employment growth —
the key driver of vehicle sales — also remains solid, while urban income growth continues to advance at a
double-digit pace.
Purchases in China will also be buoyed by increased availability of automotive financing options, as automakers
— both foreign and domestic — increasingly seek to attract younger buyers. Auto financing in China has
historically focused on luxury vehicles, but most mass-market automakers have set up financing subsidiaries in
recent years and volumes are advancing at a double-digit pace.
Car sales are also beginning to rebound in India, advancing above a year earlier during the past two months.
This represents a significant reversal from seven consecutive months of year-over-year declines through April,
and reflects improving sentiment as the new government has pledged to prioritize economic reforms. Interest
rates have also declined in India, as inflation has eased from a peak of 11% late last year to 7.3% in June.
Lower interest rates will support further gains in vehicle sales, as roughly 70% of overall sales require financing.
In contrast, car sales in Russia have weakened in recent months and will be further pressured by slowing
economic growth and the recent 50 basis point increase in the central bank rate to 8% to stem inflation and
support the ruble amid geopolitical tensions over Ukraine. The central bank also indicated that it will continue to
raise interest rates if inflation risks persist. As a result, we have downgraded our sales outlook for Russia, with
full-year 2014 purchases now expected to post a double-digit decline to 2.44 million units — the lowest level
since 2010.
Scotiabank Economics
Scotia Plaza 40 King Street West, 63rd Floor
Toronto, Ontario Canada M5H 1H1
Tel: (416) 866-6253 Fax: (416) 866-2829
Email: [email protected]
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank.
Opinions, estimates and projections contained herein are our own as of the date hereof and are
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 or
implied, is made as to their accuracy or completeness. Neither Scotiabank nor its affiliates accepts
any liability whatsoever for any loss arising from any use of this report or its contents.
TM
75
16
Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Global Auto Report is available on scotiabank.com, Bloomberg at SCOT and Reuters at SM1C
July 30, 2014
Global Economics
Global Auto Report
Car sales and production in Western Europe have advanced year-over-year for ten consecutive months, and will
increase this year from a sixteen-year low in 2013. Most economic indicators that drive vehicle sales are showing
improvement, leading to broad-based gains in both purchases and assemblies. During the first half, car sales in Western
Europe advanced 5% above a year earlier, with volumes strengthening in fourteen of the eighteen countries in the region. Our
leading indicator of car sales for Western Europe is at the highest level in more than a decade, a development consistent with
recent surveys pointing to a broad-based improvement in economic activity. In particular, Markit indicates that outside of
Germany and France, euro zone members recently posted the largest increase in business activity since August 2011.
After six years of declining volumes, car sales have also started to strengthen across the new EU members in Central and
Eastern Europe. The improvement partly reflects low base effects, as 2013 volumes slumped 36% below the 2007 peak.
Poland is the largest market in the region, accounting for 40% of overall sales among the new EU members. However, there is
a risk that car sales and economic activity across all of Europe will be dampened by the ongoing Ukraine-Russia conflict,
especially as the United States and Western Europe toughen their sanctions on Russia.
NAFTA Sales Rebound To Pre-Crisis Levels
Passenger vehicle sales in North America have been stronger than expected, prompting an increase in our full-year 2014
forecast to 19.2 million units — the highest level since 2006. The United States is leading the way, with volumes underpinned
by a strengthening labour market and improved financing. U.S. auto loan growth is advancing at the fastest pace in nearly a
decade, while delinquencies have dropped to record lows, enabling lenders to offer lower rates and enhanced terms. As a
result, we have increased our 2014 U.S. sales forecast by 300,000 units to 16.3 million units. We expect a strengthening
economy, improving household balance sheets and ongoing replacement demand to lift sales to 16.8 million in 2015, a level
nearly matching the record 17 million unit pace from 2000 through 2005.
In Canada, purchases are on target to climb to a record 1.77 million units this year, surpassing the 2013 peak of 1.74 million.
Volumes are being bolstered by the best vehicle affordability in decades, low interest rates and improving consumer
confidence, especially in Western Canada where the labour market is healthiest. Volumes in Mexico have been flat so far this
year, but are expected to gain momentum in the second half, buoyed by the recent 50 basis point reduction in interest rates,
rising consumer confidence and stronger economic growth. In June, consumer confidence in Mexico climbed to an eight-month
high, helping to lift car sales to an annualized 1.1 million units — the highest level since last August.
Any pickup in car sales will be slower and more challenging in South America. Activity in Brazil, which accounts for 60% of
overall volumes in the region, was dampened in June/July by the FIFA World Cup and will be held back by the Presidential
election in October. In addition, the pace of credit creation continues to moderate, as lower bond market yields have yet to filter
down to posted loan rates. Automotive loan rates in Brazil still remain more than 3 percentage points above the mid-2013 low.
International Car Sales Outlook
(m illions of units)
1990-99
2000-10
2011
2012
2013
2014f
39.20
16.36
1.27
14.55
0.54
50.71
17.97
1.59
15.40
0.98
60.80
15.22
1.59
12.73
0.90
64.98
17.11
1.68
14.44
0.99
68.69
18.33
1.74
15.53
1.06
71.99
19.15
1.77
16.30
1.08
13.11
3.57
14.26
3.30
12.80
3.17
11.76
3.08
11.55
2.95
12.25
3.10
Eastern Europe
Rus s ia
1.18
0.78
2.75
1.56
3.90
2.65
4.14
2.93
4.08
2.78
3.90
2.44
Asia
China**
India
6.91
0.43
0.31
13.05
4.51
0.98
24.41
12.16
1.95
27.25
13.18
2.02
29.98
16.30
1.87
32.38
18.36
1.78
South America
Brazil
1.64
0.94
2.68
1.67
4.47
2.64
4.72
2.84
4.75
2.76
4.31
2.67
TOTAL SALES
North America*
Canada
United States
Mexico
Western Europe
Germ any
*Includes light trucks. **Includes crossover utility vehicles from 2005.
2
July 30, 2014
Global Economics
Global Auto Report
Canada/U.S. Motor Vehicle Sales Outlook
1991-05
Average
CANADA
Cars
Domestic
Transplants
Imports
Light Trucks
2006-11
15.5
8.3
7.2
15.58
2.50
11.67
1.41
(millions of units, annualized)
13.10
15.77
16.49
2.15
2.46
2.38
8.80
10.30
11.06
2.15
3.01
3.05
UNITED STATES
Cars
Light Trucks
2014
Jan-June **
Annual f
2013
(thousands of units, annualized)
1,587
1,677
1,745
795
760
761
489
470
493
268
280
301
306
290
268
792
917
984
(millions of units, annualized)
13.4
14.4
15.5
6.6
7.2
7.6
6.8
7.2
7.9
1,398
797
583
178
214
601
NORTH AMERICAN
PRODUCTION*
CANADA
UNITED STATES
MEXICO
2012
1,772
732
465
300
267
1,040
1,770
730
455
302
275
1,040
16.1
7.5
8.6
16.3
7.6
8.7
16.96
2.34
11.43
3.19
17.10
2.35
11.50
3.25
*Inc ludes transplants; light, medium and heavy truc ks. **Canadian sales are Sc otiabank estimates.
Vehicle Sales Outlook By Province*
(thousands of units, annual rates)
1994-05
Average
2006-11
2012
2013
1,446
1,587
1,677
1,745
1,772
1,770
ATLANTIC
102
119
126
135
134
136
CENTRAL
Quebec
Ontario
936
366
570
987
408
579
1,034
416
618
1,061
415
646
1,088
396
692
1,074
417
657
WEST
Manitoba
Saskatchewan
Alberta
British Columbia
408
42
36
166
164
481
45
45
220
171
517
50
55
239
173
549
54
58
257
180
550
54
55
259
182
560
55
59
263
183
CANADA
2014
Jan-June **
Annual f
*Includes cars and light trucks. **Scotiabank estimates.
800
300
thousands of units
70
thousands of units
275
700
60
250
Ontario
225
600
175
British
Columbia
150
Quebec
40
125
30
100
300
200
75
50
80
84
88
92
96
Manitoba
50
200
500
400
thousands of units
Alberta
00
04
08
12
Saskatchewan
Atlantic
80
84
88
92
96
00
04
08
12
20
80
84
88
92
96
00
04
08
12
Includes cars and trucks (light, medium and heavy).
Shaded bars indicate U.S. recession periods.
3
July 30, 2014
Global Economics
Global Auto Report
Auto Market Share By Manufacturer — Canada*
(thousands of units, not seasonally adjusted)
TOTAL
Big Three
General Motors
Ford
Chrysler
Japanese
Honda
Toyota
Nissan
Mazda
Mitsubishi
Subaru
Hyundai
Volkswagen
Kia
BMW
Mercedes-Benz
Other
2013
Jan to June
Units
% of Total
2014
Jan to June
Units
% of Total
2013
June
Units
% of Total
2014
June
Units
% of Total
391.6
104.5
38.7
36.9
28.9
100.0
26.7
9.9
9.4
7.4
381.9
90.8
38.0
33.4
19.4
100.0
23.8
9.9
8.8
5.1
75.0
19.9
7.0
7.4
5.5
100.0
26.5
9.3
9.9
7.3
77.3
17.5
6.1
7.4
4.0
100.0
22.7
8.0
9.5
5.2
155.7
44.6
51.9
20.7
26.5
4.5
6.3
39.8
11.4
13.2
5.3
6.8
1.2
1.6
164.5
48.8
52.2
25.3
26.2
5.3
6.8
43.1
12.8
13.7
6.6
6.9
1.4
1.8
28.7
8.9
9.6
4.2
4.0
0.7
1.2
38.3
11.8
12.8
5.6
5.3
0.9
1.6
32.7
10.0
9.7
6.1
4.7
1.0
1.1
42.2
13.0
12.6
7.9
6.0
1.3
1.5
51.3
27.0
25.7
10.0
9.0
8.4
13.1
6.9
6.6
2.5
2.3
2.1
47.1
24.5
26.6
8.9
10.3
9.2
12.3
6.4
7.0
2.3
2.7
2.4
10.7
4.7
5.4
2.0
2.1
1.5
14.2
6.3
7.2
2.7
2.7
2.1
10.5
5.1
5.2
2.3
2.1
1.9
13.6
6.5
6.8
3.0
2.7
2.5
Units
2014
June
% of Total
*Source: Dealer sales from the Global Automakers of Canada.
Truck Market Share By Manufacturer — Canada*
(thousands of units, not seasonally adjusted)
2013
Jan to June
Units
% of Total
2014
Jan to June
Units
% of Total
TOTAL
Big Three
General Motors
Ford
Chrysler
511.4
302.8
82.7
109.8
110.3
100.0
59.3
16.2
21.5
21.6
544.0
317.5
80.6
109.7
127.2
100.0
58.4
14.8
20.2
23.4
99.7
59.8
17.7
21.3
20.8
100.0
60.0
17.8
21.4
20.8
101.7
61.4
14.9
23.5
23.0
100.0
60.3
14.6
23.1
22.6
Other Domestic
21.1
4.1
20.3
3.7
3.2
3.2
3.8
3.7
121.5
31.9
45.3
23.3
9.4
6.7
10.9
23.8
6.2
8.9
4.6
1.8
1.3
2.1
136.3
33.4
48.4
30.8
10.1
5.3
13.6
25.0
6.1
8.9
5.7
1.9
1.0
2.5
23.4
6.1
8.7
4.7
1.7
1.3
2.1
23.5
6.1
8.8
4.7
1.7
1.3
2.1
24.5
6.1
9.0
5.2
1.8
0.8
2.4
24.1
6.0
8.9
5.1
1.7
0.8
2.3
Hyundai
Kia
20.5
11.0
4.0
2.1
23.2
10.4
4.3
1.9
3.9
2.4
3.9
2.4
3.2
2.1
3.2
2.1
Other Imports
34.5
6.7
36.3
6.7
7.0
7.0
6.7
6.6
LIGHT TRUCKS
492.8
96.4
527.6
97.0
96.8
97.2
99.1
97.4
Japanese
Honda
Toyota
Nissan
Mazda
Mitsubishi
Subaru
2013
June
Units
% ot Total
*Source: Dealer sales from the Global Automakers of Canada.
4
July 30, 2014
Global Economics
Global Auto Report
Auto Sales By Province
(thousands of units, not seasonally adjusted)
CANADA
ATLANTIC
Newfoundland
Nova Scotia
New Brunswick
Prince Edward Island
CENTRAL
Quebec
Ontario
WEST
Manitoba
Saskatchewan
Alberta
British Columbia
2013
Jan to May
2014
Jan to May
2013
May
2014
May
316.7
301.7
86.1
82.7
27.3
6.2
11.6
8.0
1.5
25.3
5.5
11.0
7.5
1.3
8.1
1.8
3.5
2.3
0.5
7.5
1.6
3.1
2.3
0.5
220.7
99.6
121.1
211.3
91.3
120.0
60.1
27.2
32.9
58.5
25.7
32.8
68.7
7.6
5.1
25.9
30.1
65.1
6.7
4.8
23.6
30.0
17.9
2.2
1.4
6.9
7.4
16.7
1.7
1.2
6.1
7.7
Truck Sales By Province*
(thousands of units, not seasonally adjusted)
2013
Jan to May
2014
Jan to May
2013
May
2014
May
411.1
443.2
102.9
114.9
29.2
8.3
10.3
9.3
1.3
29.8
8.4
10.7
9.3
1.4
7.6
2.2
2.7
2.4
0.3
8.0
2.3
2.8
2.5
0.4
CENTRAL
Quebec
Ontario
221.5
79.2
142.3
249.1
78.9
170.2
56.9
20.3
36.6
66.5
21.1
45.4
WEST
Manitoba
Saskatchewan
Alberta
British Columbia
160.4
15.2
18.3
81.8
45.1
164.3
15.5
18.0
83.9
46.9
38.4
3.7
4.3
19.5
10.9
40.4
3.9
4.3
20.5
11.7
CANADA
ATLANTIC
Newfoundland
Nova Scotia
New Brunswick
Prince Edward Island
*Light, medium and heavy trucks.
5
July 30, 2014
Global Economics
Global Auto Report
Canadian Motor Vehicle Production*
(thousands of units, not seasonally adjusted)
2013
Jan to June
2014
Jan to June
2013
June
2014
June
1,207.6
1,186.0
209.7
201.3
CAR
Chrysler
GM
Honda
Toyota
496.3
126.4
145.7
120.5
103.7
466.9
118.5
135.9
99.6
112.9
84.8
21.8
22.9
18.6
21.5
78.3
19.3
24.4
16.3
18.3
TRUCKS**
Chrysler
Ford
GM
Honda
Toyota
Others
711.3
158.5
132.8
174.8
95.9
144.8
4.5
719.1
182.3
106.1
173.2
102.3
149.8
5.4
124.9
31.8
21.9
28.1
16.9
25.4
0.8
123.0
31.5
22.1
27.7
16.1
24.7
0.9
TOTAL
*Production data from Ward’s Automotive Reports. **Light, medium and heavy trucks.
Canada — Motor Vehicle Production
3.4
Canada — World Auto Trade Balances
3.4
50
3.0
40
2.6
2.6
30
2.2
2.2
20
quarterly
3.0
Total
50
billions of dollars
40
Assembled vehicles
30
20
Total
1.8
1.8
10
10
1.4
1.4
0
0
1.0
1.0
-10
Cars
Trucks*
0.6
0.2
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
Millions of units, seasonally adjusted annual rates.
*Light, medium and heavy trucks.
-10
Parts
0.6
-20
0.2
-30
-20
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
-30
2014 data are January-May annualized.
6
July 30, 2014
Global Economics
Global Auto Report
New & Used Car Prices
Scotiabank Car Price Indicators — Canada
year-over-year per cent change
25
25
Used*
15
15
New
5
5
CPI
-5
-5
-15
79 80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
14
-15
*Scotiabank estimate from Canadian Black Book data.
20
Scotiabank Car Price Indicators — Canada
20
thousands of dollars by age of car, seasonally adjusted
18
18
16
16
14
14
1 Year
12
12
10
10
2 Year
8
8
6
4
2
6
4 Year
79 80
82
84
86
88
90
92
94
4
96
98
00
02
04
06
08
10
12
14
2
Scotiabank estimate from Canadian Black Book data.
Scotiabank Car Price Indicators — United States
year-over-year per cent change
25
15
15
Used
5
-15
5
CPI
New
-5
79 80
82
84
86
88
90
92
94
96
98
25
00
-5
02
04
06
08
10
12
14
-15
Consumer price indices for new and used cars.
Shaded areas indicate recession periods.
7
July 30, 2014
Global Economics
Global Auto Report
Canadian Corporate Financial Performance
Motor Vehicle Dealers and Repair Shops
Annual
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Net Income
After Tax
($ mil)
521
773
594
571
799
942
1089
1142
1392
1649
1664
1821
1607
Pre-Tax
Profit
Margin (%)
0.75
1.02
0.91
0.69
0.93
1.20
1.41
1.43
1.84
2.06
1.99
2.05
1.66
876
1708
1988
1856
1332
1.11
1.67
1.91
1.90
1.51
656
-68
1.19
0.10
Quarterly at annual rates
2013Q1
Q2
Q3
Q4
2014Q1
Average (89-13)
Low (89-13)
Definition of Ratios:
Pre-tax Profit Margin: pre-tax income/sales
Inventory Turnover Ratio: sales/inventory
Inventory
Turnover
Ratio
7.06
7.48
5.30
4.98
5.35
5.16
5.05
5.04
5.34
4.91
5.17
4.81
5.01
Interest
Coverage
Ratio
2.13
3.09
2.65
2.25
2.55
2.64
3.36
3.51
4.85
5.34
5.19
5.44
5.28
Debt/
Equity
Ratio
1.98
1.96
2.79
3.18
2.75
2.73
2.49
2.43
2.14
2.06
2.01
2.01
1.81
Return on
Shareholders
Equity (%)
8.37
11.28
10.14
10.49
12.90
14.37
15.13
14.66
16.99
18.09
17.44
17.56
13.55
4.49
5.30
5.25
5.02
4.64
3.68
5.70
6.17
5.50
4.58
1.87
1.89
1.81
1.70
1.71
7.85
14.94
16.46
14.55
10.40
6.10
4.38
3.00
1.10
2.35
3.48
11.14
-1.20
Interest Coverage Ratio: (pre-tax income and interest payments)/(interest payments)
Debt/Equity Ratio: (short-term and long-term debt)/total equity
Return of Shareholders’ Equity: after-tax income/total equity
Retail Auto Dealer Bankruptcies
10
10
number of bankruptcies
8
8
2013
2012
6
6
2011
4
4
2
2
0
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
0
New car dealers only; cumulative total during the year.
8