Global vehicle sales continue to gain momentum: Scotiabank

Global car sales accelerated sharply in February, which is in keeping with global growth, a new report from Scotiabank said.

Volumes jumped 6.9% above a year earlier, Scotiabank’s latest Global Auto Report said – well above the 4% year-over-year gain during the previous two months.

“The acceleration was broad-based and was led by a 16% year-over-year surge in Asia,” Scotiabank said. “In particular, sales in China returned to a double-digit year-over-year growth path, as automakers increased incentives to cushion the negative impact of the January 2017 phase-in of the sales tax increase for small vehicles with 1.6 litre or smaller engines.”

The industry in China is also lobbying the government to introduce new incentives to stimulate demand from rural residents. “These developments imply that this year’s expected moderation in vehicle sales in China is likely to be smaller than originally feared, especially since economic activity has remained resilient,” the report said.

In South America, meanwhile, sales were also stronger than expected, advancing above a year earlier in February for the fourth consecutive month.

More recent sales data for March confirm the trend of record volumes in both Canada and Mexico, Scotiabank said, but some disappointment in the U.S. results. “Sales in Canada last month jumped 7% above a year earlier, buoyed by double-digit gains for both light trucks and luxury models,” the report said. “This solid performance lifted year-to-date sales to an annualized 2.1 million units – the best three-month performance on record, and well above the full-year 2016 total of 1.95 million.”

Sales gains were even stronger in Mexico, Scotiabank said, jumping 17% above a year ago in March, even as interest rates have moved higher and economic activity has slowed.

In contrast, car and light truck sales declined in the U.S. to an annualized 16.6 million units last month, the lowest sales pace of the past year and well below expectations. “Weak business purchases accounted for much of the slowdown, with fleet volumes for the Detroit Three slumping 14% below a year earlier,” Scotiabank said. “However, sales to households continue to move higher and are expected to climb further during the upcoming spring selling season, especially since the industry is well stocked.” Despite numerous media reports highlighting that new vehicle inventories are high, the industry remains comfortable with its production schedule and still plans to produce a record annualized 18.5 million units in Canada, the U.S. and Mexico during the April–June period.