Global auto sales expanded at a solid pace in the first half of 2018: report
But cracks are beginning to appear in certain emerging economies, a new report from Scotiabank says, and the threat of rising U.S. protectionism seems to have impacted vehicle sales in China.
Vehicle sales in Canada and the U.S. continued on a slight downward trajectory in the first half of 2018, though both are still set to close 2018 near their respective record-high levels in 2017 and 2016, a new report from Scotiabank says.
In Canada, auto volumes fell by 1.1 per cent year-over-year (y/y) in June which marked a minor fall of 0.2 per cent y/y year-to-date (YTD). Auto purchases in the U.S., meanwhile, climbed by 4.7 per cent y/y in June for a YTD increase of 1.1 per cent y/y.
“The year-on-year increase so far in 2018, however, is a result of weak auto sales in the first half of 2017 owing to poor fleet sales figures,” Scotiabank said in its latest Global Auto Report. “This decline was compensated in the remainder of the year by a surge in auto demand due to vehicle replacement from hurricane damage.”
STRENGTH IN ONTARIO COUNTERS WEAKNESS IN THE WEST
Rising auto sales in Ontario, and to a lesser degree Quebec, have prevented a large decline Canada-wide following a sharp contraction in the Western provinces in the first six months of 2018, Scotiabank said. “Vehicle sales in Ontario have climbed by 1.9 per cent y/y YTD in 2018, as employment in the province expanded by 2.2 per cent y/y in June, the largest increase among the provinces after PEI’s 2.4 per cent y/y rise,” the report said. “British Columbians scaled back their pace of spending in the first half of 2018 amid a slowdown in labour markets, for a YTD decline in sales volumes of 2.5 per cent y/y.”
Fleet sales have compensated for a decline in retail volumes in Canada so far in 2018, the report continued. “However, the increase in activity in the fleet market is driven by an anomalous surge in deliveries in Manitoba, where fleet sales have surged by 225 per cent y/y YTD, with nearly all the gains concentrated on one automaker. Excluding the Manitoba market, fleet sales are down by 3.2 per cent y/y YTD for Canada as a whole, around ten times the 0.3 per cent y/y decline in retail sales.”
THIRTEEN CONSECUTIVE MONTHS OF DECLINING SALES IN MEXICO
Mexican auto sales fell for the thirteenth consecutive month in year-on-year terms in June amid political uncertainty leading into the July 1st general elections. “Purchase volumes contracted by 8.4 per cent y/y in the first half of 2018 compared to the same period last year, after a 6.0 per cent y/y drop in June,” Scotiabank said.
WORSENING OUTLOOK IN ARGENTINA AND BRAZIL
According to Scotiabank, auto deliveries in Latin America posted a double digit year-on-year increase in the first half of the year. “However, sales growth in Brazil and Argentina has cooled in recent months,” the report said. “Auto purchases in Brazil have slowed down from a strong pace of growth in the August 2017 to April 2018 period—when sales expanded by an average of 19 per cent y/y—to 3.1 per cent y/y in June 2018.” In Argentina, meanwhile, auto sales fell by 31 per cent y/y in June to their lowest monthly level since February 2016. “On a positive note, vehicle purchases in the smaller Chilean market remained strong in June, growing 22 per cent y/y for a year-to-date rise of 24 per cent y/y.”
POLITICAL UNCERTAINTY SPLITS “EU-CORE” GROWTH IN SALES
Auto sales growth has diverged across the major European economies so far this year owing to political uncertainty in the UK and Italy, Scotiabank said, while economic growth remains at a steady, though slowing, pace in France, Germany, and Spain. “The UK economy continues to be bogged down by Brexit uncertainty, which resulted in a 3.5 per cent y/y decline in auto sales in H1-2018 against a backdrop of near-zero growth in real wages,” Scotiabank said. “Sales growth in the other major EU economies was in line with a broader pick-up in economic activity in the continent, which is nevertheless at risk of losing momentum owing to the U.S.’s protectionist threats.” Sweden was an anomaly in June, Scotiabank said, where vehicle purchases reached an all-time high – up 71 per cent month-on-month – in anticipation of a tax on new purchases of high-emission vehicles that kicked in on July 1st. “In Eastern Europe, sales volumes in Russia have softened to their slowest pace of growth since April 2017,” the report said. “Nevertheless, Russia continues to provide support for a strong expansion in sales in the region. Vehicle purchases in Russia climbed by 10.9 per cent y/y in June for an 18 per cent y/y increase in the first half of 2018.”
SALES IN CHINA SLOW DOWN DUE TO U.S. TARIFFS
Asia Pacific vehicle sales posted a solid increase in the first half of 2018 on the back of a pick-up in Chinese auto purchases, Scotiabank said, which may nevertheless slow down during the remainder of the year if China’s trade dispute with the U.S. escalates. “Volumes sold rose by 5.2 per cent y/y in China in June, down from 11.4 per cent y/y and 9.2 per cent y/y in April and May, respectively,” Scotiabank said. “The U.S. exported only 267,000 passenger vehicles to China last year, which is only about 1 per cent of the 25 million units sold in the country in 2017 and roughly a tenth of all imported autos sold in China. Domestic sales are thus unlikely to be directly impacted by the tariffs, but rather experience a slump from the economic impact that would ensue if the U.S. Administration moves forward with its threat to impose tariffs on US$200 billion, or more, in imports from China.”