Global Economics

Carlos Gomes (416) 866-4735

carlos.gome s @ s cotiabank.com
June 27, 2014
Global Auto Report
Western Europe: Sales & ro!uction Gear "p
Recent Global Sales Developments
Global car sales re#accelerate! in $a%, climbin& 4'() abo*e a %ear
earlier + a si&ni,icant upturn ,rom onl% a 1) &ain in April' The
improvement as broa!-base!" ith the sales pace #$ickening in most
regions. %hina an! the &nite! 'tates le! the a( ith !o$ble-!igit (ear-
over-(ear gains" b$t vol$mes also picke! $p across )sia an! *estern
+$rope alongsi!e improving economic con!itions. The latest global ,-.
!ata in!icate that ne or!ers /or both man$/act$rers an! service provi!ers
0$mpe! to a /ive-month high in -a(. .n contrast" !espite some stabili1ation
in 2ra1il" car sales remaine! eak across both 'o$th )merica an! +astern
+$rope 3 especiall( 4$ssia. 5oever" these to regions acco$nt /or onl(
146 o/ global car p$rchases.
.n %ana!a" passenger vehicle sales soare! to a recor! high o/ 1.87 million
$nits (ann$ali1e!) in -a(" s$rpassing the previo$s peak o/ 1.88 million set
in 8an$ar( 9::8. )s in previo$s months" crossover $tilit( vehicles le! the
a(" s$rging 176 above a (ear earlier an! li/ting overall light tr$ck sales
196 above a (ear ago. ;iven the stronger-than-e<pecte! per/ormance o/
the last to months an! the recent increase in in!$str( incentives 3
incl$!ing the ret$rn o/ =emplo(ee pricing> 3 e have raise! o$r /$ll-(ear
9:14 /orecast b( 1:"::: $nits to 1.77 million $nits.
Auto Recovery Gains Momentum In Western Europe
Car sales an! pro!uction in Western Europe are in t-e earl% sta&es
o, a c%clical reco*er%, .it- purc-ases set to increase t-is %ear ,rom
a si/teen#%ear lo. in 2010' -ost economic in!icators that !rive vehicle
sales are shoing improvement" lea!ing to broa!-base! gains in both
p$rchases an! assemblies so /ar this (ear. Thro$gh -a(" car sales in
*estern +$rope have a!vance! 66" ith vol$mes strengthening in
9
1
:
-1
-9
:
-5
-1:
-15
-9:
-95
-3:
-35
-4:
1mpro*e! Job rospects 2i,t Car Sales
(?( 6 change m illions o/
$nits
Job Gro.t- ##
Western
Europe
Car Sales ##
Western
Europe
1: 11 19 13 14
Con,i!ence 3ac4 to re#Crisis 2e*els
in!e<
Consumer Con,i!ence
## Euro 5one
Consumer Con,i!ence ## "'6'
:7 :8 :7 1: 11 19 13 14
14
13
19
11
1:
:
-5
-1:
-15
-9:
-95
-3:
-35
-4:
/o$rteen o/ the eighteen co$ntries in the region. @$r lea!ing in!icator o/ car sales /or *estern +$rope recentl(
climbe! to the highest level in more than a !eca!e" pointing to several (ears o/ improving vol$mes. '$pportive
monetar( polic( ill keep interest rates at e<ceptionall( lo levels /or an e<ten!e! perio!" provi!ing /$rther
s$pport /or the rebo$n! in a$to p$rchases.
The labo$r market 3 the ke( !river o/ car sales 3 has gaine! moment$m across *estern +$rope" enabling
ho$sehol!s to consi!er replacing their aging vehicles. The &nite! Aing!om is lea!ing the a(" ith 0ob groth
accelerating to a 95-(ear high o/ 9.66 (?( in )pril. The 0ob market has also bottome! across continental +$rope.
B$ring the /irst #$arter" emplo(ment levels /or the 18 co$ntries o/ the e$ro 1one (+&18) climbe! above a (ear
ago /or the /irst time since late 9:11. 8ob prospects are even improving /or the nations most impacte! b( the
+$ropean sovereign !ebt crisis an! hich re#$ire! /inancial assistance. Cor e<ample" ,ort$gal has poste! one
o/ the sharpest !rops in $nemplo(ment across *estern +$rope since earl( 9:13. The $nemplo(ment rate in
,ort$gal has /allen b( 9.8 percentage points /rom its peak in Cebr$ar( 9:13" compare! ith a :.3 percentage
point !ecline across the entire +&18 over the same perio!. )s a res$lt" car sales in ,ort$gal have s$rge! b(
more than 4:6 so /ar this (ear 3 the strongest gain across all o/ +$rope.
Scotiaban4 Economics
'cotia ,la1a 4: Aing 'treet *est" 63r!
Cloor
Toronto" @ntario %ana!a -55 151
TelD (416) 866-6953 Ca<D (416) 866-9897
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This report has been prepare! b( 'cotiabank +conomics as a reso$rce /or the clients o/
'cotiabank. @pinions" estimates an! pro0ections containe! herein are o$r on as o/ the !ate
hereo/ an! are s$b0ect to change itho$t notice. The in/ormation an! opinions containe!
herein have been compile! or arrive! at /rom so$rces believe! reliable b$t no representation or
arrant(" e<press or implie!" is ma!e as to their acc$rac( or completeness. Eeither 'cotiabank
nor its a//iliates accepts an( liabilit( hatsoever /or an( loss arising /rom an( $se o/ this report or
its contents.
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applicable.
Global Auto Report is a*ailable on scotiaban4'com, 3loomber& at SC78 an! Reuters at S$1C
@ther lea!ing in!icators o/ vehicle sales have also improve! signi/icantl( over the past (ear. Cor e<ample" /inancial stress
in!icators /or e$ro 1one members are at one o/ the loest level since late 9::6 3 prior to the global /inancial crisis. -eanhile"
con/i!ence is at a seven-(ear high among e$ro 1one cons$mers" prompting man( ho$sehol!s to /inall( begin to loosen their
p$rse strings an! consi!er b$(ing a ne vehicle.
*ith ann$al car sales across *estern +$rope /alling 996 over the past si< (ears /rom a peak o/ 14.8 million $nits in 9::7" the
average age o/ the /leet has increase! across all markets" reaching more than 8 (ears in Crance" 1: (ears in .tal( an! 19 (ears
in 'pain. +ven in ;erman(" here the c$m$lative /all-o// in car sales as onl( 66" the average age o/ the /leet has climbe!
to nearl( 7 (ears 3 the highest level on recor! /or !ata going back to 178:. There are no more than 16 million cars on
;erman roa!s that are at least 1: (ears ol!" $p /rom 13 million as recentl( as 9::7. The increase in the age o/ the vehicle /leet
combine! ith rising $se! car prices 3 a lea!ing in!icator /or ne vehicle sales 3 point to rising replacement !eman! an!
several (ears o/ higher vol$mes across *estern +$rope. Cor e<ample" $se! car prices in ;erman( have s$rge! more than
176 over the past (ear 3 the /astest gain on recor!. ,rices have also stea!ie! in Crance" the &nite! Aing!om an! 'pain" a
signi/icant improvement /rom the eak pricing environment since the emergence o/ the global /inancial crisis in 9::8.
.n /act" the improvement in cons$mer activit( c$rrentl( $n!era( across *estern +$rope e<ten!s ell be(on! the a$to market.
@verall retail activit( in the e$ro 1one have consistentl( been above a (ear earlier since 8an$ar(" an! in )pril a!vance! 9.46
(?( 3 the best per/ormance in more than seven (ears.
Rising Production In Europe & Nort America
Stren&t-enin& !eman! is lea!in& to an ups.in& in *e-icle pro!uction across Western Europe' B$ring the /irst /ive
months o/ 9:14" vehicle assemblies climbe! 66 above a (ear earlier" an! ne or!ers /or vehicles assemble! in ;erman( an!
'pain 3 the to largest vehicle man$/act$rers in *estern +$rope 3 contin$e to move higher. )s a res$lt" .5' )$tomotive
recentl( $pgra!e! its +$ropean vehicle pro!$ction /orecast /or both the secon! #$arter an! /or the /$ll (ear. This !evelopment
coinci!es ith strengthening pro!$ction across Eorth )merica 3 a$tomakers booste! assemblies in -a( 36 above their
original sche!$le an! are set to pro!$ce recor! vol$mes in 8$ne?8$l( 3 an! !o$ble-!igit gains in %hina" hich bo!e ell
/or global economic activit(. 4ising vehicle o$tp$t ill also boost !eman! /or an e<tensive #$antit( o/ inp$ts" incl$!ing steel"
plastics" metals an! electronics that are re#$ire! to pro!$ce motor vehicles an! parts. (Bata /rom the .ron F 'teel .nstit$te
in!icate the steel pro!$ction accelerate! to 3.56 (?( in -a(" $p /rom onl( 1.36 in Cebr$ar(.) 4ising vehicle pro!$ction in
Eorth )merica an! +$rope is ver( positive /or the %ana!ian s$ppl( chain. +ach vehicle assemble! in Eorth )merica contains
nearl( &'G1"9:: o/ parts /rom %ana!a>s three largest a$to parts companies. This compares ith &'G845 /or each vehicle
assemble! in +$rope. 5oever" each car an! tr$ck pro!$ce! in other 0$ris!ictions contains less than &'G45 o/ parts /rom
these s$ppliers.
June 27, 2014
Global Auto Report
Global Economics
2
1nternational Car Sales 7utloo4
(m illions o/ $nits )
1990#99 2000#10 2011 2012 2010 2014,
878A2 SA2ES 09'20 (0'71 :0';0 :4'9; :;':9
72'10
<ort- America= 1:'0: 17'97 1('22 17'11 1;'00 1;';7
%ana!a 1.97 1.57 1.57 1.68 1.74 1.77
&nite! 'tates 14.55 15.4: 19.73 14.44 15.53 16.::
-e<ico :.54 :.78 :.7: :.77 1.:6
1.1:
W estern Europe 10'11 14'2: 12';0 11'7: 11'((
12'2(
;erm an( 3.57 3.3: 3.17 3.:8 9.75
3.1:
Eastern Europe 1'1; 2'7( 0'90 4'14 4'0;
4'12
4$s s ia :.78 1.56 9.65 9.73 9.78
9.66
Asia :'91 10'0( 24'41 27'2( 29'9; 02'0;
%hinaHH :.43 4.51 19.16 13.18 16.3: 18.36
.n!ia :.31 :.78 1.75 9.:9 1.87 1.78
Sout- America 1':4 2':; 4'47 4'72 4'7(
1991 #0 ( 200: # 1 1 201 2 2010
2014
Cana!a>"'S' $otor ?e-icle Sales 7utloo4
)verage
(tho$s an!s o/ $nits " ann$ali1e!)
Jan#$a%
HH Annual ,
CA<A@A 1,09; 1,(;7 1,:77 1,74( 1,7(4 1,770
%ars 777 775 76: 761 794 73:
Bom es tic 583 487 47: 473 453 455
Trans plants 178 968 98: 3:1 977 3:9
.m ports 914 3:6 97: 968 971 975
Iight Tr$cks 6:1 779 717 784 1":3: 1":4:
(m illions o/ $nits " ann$ali1e!)
"<18E@ S8A8ES 1('( 10'4 14'4 1('( 1('9 1:'0
%ars 8.3 6.6 7.9 7.6 7.3 7.3
Iight Tr$cks 7.9 6.8 7.9 7.7 8.6 8.7
<7R8A A$ER1CA<
(m illions o/ $nits "
ann$ali1e!)
R7@"C817<= 1('(; 10'10 1('77 1:'49 1:':0 17'10
%)E)B) 9.5: 9.15 9.46 9.38 9.31 9.35
&E.T+B 'T)T+' 11.67 8.8: 1:.3: 11.:6 11.99 11.5:
-+J.%@ 1.41 9.15 3.:1 3.:5 3.1: 3.95
H.nc l$!es transplantsK light" me!i$m an! heav( tr$c ks. HH%ana!ian sales are 'c otiabank estimates.
(tho$s an!s o/ $nits " ann$al rates )
1994 #0(
)verage
200: # 11 2012 2010 2014
Jan#$a%
HH
Annual ,
CA<A@A 1,44: 1,(;7 1,:77 1,74( 1,7(4 1,770
A82A<81C 102 119 12: 10( 104 10:
CE<8RA2 90: 9;7 1,004 1,0:1 1,0:; 1,074
L$ebec 366 4:8 416 415 373 417
@ntario 57: 577 618 646 675 657
WES8 40; 4;1 (17 (49 ((2 (:0
-anitoba 49 45 5: 54 54 55
'as katchean 36 45 55 58 55 57
)lberta 166 99: 937 957 96: 963
2ritis h %ol$m bia 164 171 173 18: 183 183
H.ncl$!es cars an! light tr$cks . HH'cotiabank es tim ates .
700
:00
(00
400
tho$san!s o/ $nits
7ntario
Buebec
27(
2(0
22(
200
17(
1(0
12(
tho$san!s o/ $nits
Alberta
3ritis-
Columbia
tho$san!s o/ $nits
:0
(0
40
$anitoba
000
100
7( Atlantic
00
Sas4atc-e.an
;0 ;4 ;; 92 9: 00 04 0; 12
; 0 ; 4 ;; 92 9: 00 04 0;
12
;0 ; 4 ;; 92 9: 00 04 0; 12
.ncl$!es cars an! tr$cks (light" me!i$m an!
heav(). 'ha!e! bars in!icate &.'. recession
perio!s.
?e-icle Sales 7utloo4 3% ro*ince=
000
;00 70
20
200
(0
8ruc4 $ar4et S-are 3% $anu,acturer + Cana!a=
(tho$s an!s o/ $nits " not s eas onall( a!0$s
te!)
2010 2014 2010 2014
8an to -a( 8an to -a( -a( -a(
&nits 6 o/ Total &nits 6 o/ Total &nits 6 ot Total &nits 6 o/ Total
878A2 411'; 100'0 442'4 100'0 102'; 100'0 11('0 100'0
2ig Three 943.: 57.: 956.9 58.: 61.1 57.5 67.1
6:.1
;eneral -otors 65.: 15.8 65.8 14.7 15.4 15.: 17.7
15.6
Cor! 88.5 91.5 86.9 17.5 93.5 99.7 93.8
9:.7
%hr(s ler 87.5 91.7 1:4.9 93.6 99.9 91.6 97.4
93.8
@ther Bom es tic 17.7 4.4 16.5 3.7 3.7 3.8 3.7
3.4
8apanes e 78.9 93.8 111.8 95.3 95.9 94.5 97.7
94.1
5on!a 95.8 6.3 97.3 6.9 7.1 6.7 7.: 6.1
To(ota 36.6 8.7 37.4 8.7 7.4 7.1 1:.:
8.7
Eis s an 18.6 4.5 95.6 5.8 4.4 4.3 5.6
4.7
-a1!a 7.7 1.7 8.4 1.7 1.7 1.7 9.1
1.8
-its $bis hi 5.4 1.3 4.5 1.: 1.1 1.: 1.:
:.8
'$bar$ 8.8 9.1 11.9 9.5 9.9 9.9 9.7 9.5
Auto $ar4et S-are 3% $anu,acturer + Cana!a=
(tho$s an!s o/ $nits " not s eas onall( a!0$s
te!)
2010 2014 2010 2014
8an to -a( 8an to -a( -a( -a(
&nits 6 o/ Total &nits 6 o/ Total &nits 6 o/ Total &nits 6 o/ Total
878A2 01:': 100'0 004'7 100'0 ;('9 100'0 ;4'0 100'0
2ig Three 84.7 96.8 73.4 94.: 94.9 98.9 9:.6
94.5
;eneral -otors 31.7 1:.: 31.7 1:.4 8.9 7.6 8.5
1:.9
Cor! 97.5 7.3 96.1 8.6 7.: 1:.4 8.:
7.5
%hr(s ler 93.5 7.5 15.4 5.: 7.: 8.9 4.1
4.8
8apanes e 197.: 4:.1 131.7 43.3 34.1 37.7 37.9
44.9
5on!a 35.8 11.3 38.7 19.7 7.6 11.9 11.5 13.6
To(ota 49.3 13.3 49.5 13.6 19.7 15.: 19.5
14.7
Eis s an 16.5 5.9 17.9 6.3 4.: 4.6 5.:
6.:
-a1!a 99.6 7.1 91.5 7.1 5.: 5.8 5.8
6.8
-its $bis hi 3.8 1.9 4.3 1.4 1.1 1.3 :.7
1.:
'$bar$ 5.9 1.6 5.6 1.8 1.4 1.6 1.5
1.8
8ruc4 Sales 3% ro*ince=
(tho$s an!s o/ $nits " not s eas onall( a!0$s
te!)
2010 2014 2010 2014
8an to )pr 8an to )pr )pr )pr
CA<A@A 00;'2 02;'0 9;'1
10('1
A82A<81C 21': 21'; 7'0
7'7
Ee/o$n!lan! 6.1 6.1 9.: 9.3
Eova 'cotia 7.6 7.7 9.6 9.7
Ee 2r$ns ick 6.7 6.8 9.3
9.3
,rince +!ar! .s lan! 1.: 1.: :.4
:.4
CE<8RA2 1:4': 1;2'( (4'2
(9'9
L$ebec 58.7 57.7 17.7 9:.6
@ntario 1:5.7 194.8 34.3 37.3
WES8 122'0 124'0 0:': 07'(
-anitoba 11.5 11.7 3.8 3.8
'as katchean 14.: 13.7 4.5
Auto Sales 3% ro*ince
(tho$s an!s o/ $nits " not s eas onall( a!0$s
te!)
2010 2014 2010 2014
8an to )pr 8an to )pr )pr )pr
CA<A@A 200': 21;'0 77'1 7:'4
A82A<81C 19'0 17'; 7'1 :'7
Ee/o$n!lan! 4.4 3.7 1.7 1.5
Eova 'cotia 8.1 7.8 3.: 9.8
Ee 2r$ns ick 5.8 5.9 9.:
9.:
,rince +!ar! .s lan! 1.: :.7 :.4
:.4
CE<8RA2 1:0': 1(2'0 (0'9
(4'4
L$ebec 79.5 65.9 95.: 94.3
@ntario 88.1 87.1 98.7 3:.1
WES8 (0'7 4;'2 1:'1 1('0
-anitoba 5.4 5.: 1.7 1.8
'as katchean 3.7 3.6 1.3
Cana!a + $otor ?e-icle ro!uction Cana!a + Worl! Auto 8ra!e 3alances
#$arterl( billions o/ !ollars
0'0 0'0 40 40
2': 2': 00
Assemble! *e-icles
00
2'2 2'2 20 20
8otal
1'; 1'; 10 10
Cars
1'4 1'4 0 0
1'0 1'0 #10 #10
arts
0': 0': #20 #20
;2 ;4 ;: ;; 90 92 94 9: 9; 00 02 04 0: 0; 10 12 14
;2 ;4 ;: ;; 90 92 94 9: 9; 00 02 04 0: 0; 10 12 14
-illions o/ $nits" seasonall( a!0$ste! ann$al
rates.
HIight" me!i$m an! heav( tr$cks.
9:14 !ata are 8an$ar(-)pril ann$ali1e!.
0'4 0'4
0'2 0'2
(0
(0
#00
#00
Cana!ian $otor ?e-icle ro!uction=
(tho$s an!s o/ $nits " not s eas onall( a!0$s
te!)
2010 2014 2010 2014
8an to -a( 8an to -a( -a( -a(
878A2 997'9 9;2'0 210'0 221';
CAR 411'( 0;7'9 ;('2 ;7'(
%hr(s ler 1:4.6 77.9 93.1
91.8
;- 199.8 111.5 9:.8 96.8
5on!a 1:1.7 83.3 17.1 17.9
To(ota 89.9 73.7 99.9
91.7
8R"C6S== (;:'4 (94'4 124';
104'0
%hr(s ler 196.7 15:.8 98.7
35.1
Cor! 11:.7 84.: 99.5 93.:
;- 146.7 145.4 98.7 98.5
5on!a 77.: 86.9 16.9 16.8
To(ota 117.4 193.5 97.4 3:.1
<e. & "se! Car rices
Scotiaban4 Car rice 1n!icators + Cana!a
95
"se!=
(ear-over-(ear per cent change
95
15
<e.
15
5 5
C1
-5 -5
8: 89 84 86 88 7: 79 74 76 78 :: :9 :4 :6 :8 1: 19 14
H'cotiabank estimate /rom %ana!ian 2lack 2ook !ata.
Scotiaban4 Car rice 1n!icators + Cana!a
18 18
16 16
14 14
19 19
1: 1:
8 8
6 6
4 4
8: 89 84 86 88 7: 79 74 76 78 :: :9 :4 :6 :8 1: 19 14
'cotiabank estimate /rom %ana!ian 2lack 2ook !ata.
Scotiaban4 Car rice 1n!icators + "nite! States
(ear-over-(ear per cent change
95 95
15
"se!
15
5
C1
5
<e.
-5 -5
8: 89 84 86 88 7: 79 74 76 78 :: :9 :4 :6 :8 1: 19 14
%ons$mer price in!ices /or ne an! $se!
cars. 'ha!e! areas in!icate recession perio!s.
77
-15 -15
9: 9:
tho$san!s o/ !ollars b( age o/ car" seasonall(
a!0$ste!
1 Cear
2 C ar
4 Cear
77
9 9
77
-15 -15
Retail Auto @ealer 3an4ruptcies
n$m ber o/ bankr$ptcies
8 8
2010
2012
6 6
2011
4 4
9 9
8an. Ceb. -ar. )pr. -a( 8$ne 8$l( )$g. 'ept. @ct. Eov.
Bec. Ee car !ealers onl(K c$m$lative total !$ring the (ear.
1: 1:
Cana!ian Corporate Dinancial er,ormance
$otor ?e-icle @ealers an! Repair S-ops
Eet .ncom e ,re-Ta< .nventor( .nteres t Bebt? 4et$rn on
)/ter Ta< ,ro/it T$rnover %overage +#$it(
'harehol!ers (G m il) -argin (6) 4atio 4atio 4atio
+#$it( (6)
)nn$al 9::1 591 :.75 7.:6 9.13 1.78 8.37
9::9 773 1.:9 7.48 3.:7 1.76 11.98
9::3 574 :.71 5.3: 9.65 9.77 1:.14
9::4 571 :.67 4.78 9.95 3.18 1:.47
9::5 777 :.73 5.35 9.55 9.75 19.7:
9::6 749 1.9: 5.16 9.64 9.73 14.37
9::7 1:87 1.41 5.:5 3.36 9.47 15.13
9::8 1149 1.43 5.:4 3.51 9.43 14.66
9::7 1379 1.84 5.34 4.85 9.14 16.77
9:1: 1647 9.:6 4.71 5.34 9.:6 18.:7
9:11 1664 1.77 5.17 5.17 9.:1 17.44
9:19 1891 9.:5 4.81 5.44 9.:1 17.56
9:13 16:7 1.66 5.:1 5.98 1.81 13.55
L$arterl( at ann$al rates
9:13L1 876 1.11 4.47 3.68 1.87 7.85
L9 17:8 1.67 5.3: 5.7: 1.87 14.74
L3 1788 1.71 5.95 6.17 1.81 16.46
L4 1856 1.7: 5.:9 5.5: 1.7: 14.55
9:14L1 1339 1.51 4.64 4.58 1.71 1:.4:
)verage (87-13) 656 1.17 6.1: 3.:: 9.35 11.14
Io (87-13) -68 :.1: 4.38 1.1: 3.48 -1.9:
Be/ inition o/ 4atiosD .nterest %overage 4atioD (pre-ta< income an! interest pa(ments)?(interest
pa(ments) ,re-ta< ,ro/ it -arginD pre-ta< income?sales Bebt?+#$it( 4atioD (short-term an! long-term !ebt)?total e#$it(
.nventor( T$rnover 4atioD sales?inventor( 4et$rn o/ 'harehol!ers> +#$it(D a/ ter-ta< income?total e#$it(
: :