Canadian Plastics

Record global auto sales expected in 2016: Scotiabank

21 million cars expected to sell in the U.S. in 2016, but sales in Canada will be flat.

January 13, 2016   Canadian Plastics

In almost every region of the globe, 2016 is going to be a very good year for car sales, according to Scotiabank.

Global car sales are expected to strengthen over the coming year, the bank said in its newest Global Auto Report, extending gains to a seventh consecutive annual record and surpassing the length of the previous upcycle which lasted six years. “Stronger economic growth will likely lift purchases 3% in 2016, up from only a 2% advance last year when volumes in emerging markets declined for the first time since 2001,” the report said. “Purchases will be buoyed by improving labor markets and a bottoming in purchases across emerging markets. Economic growth in developing countries is expected to pick up for the first time since 2010, helping reverse last year’s slide in car sales which was driven by sharp contractions in both Russia and Brazil. Low gasoline prices, improving household balance sheets and rising incomes will also help lift sales.”

North America and Western Europe were the key drivers of the improvement in global car sales last year, with volumes in these markets advancing 7% — the strongest gain in nearly two decades, Scotiabank said. “Purchases in North America climbed above 20 million units, surpassing the 2000 peak and should exceed 21 million in 2016,” the report said. “Each NAFTA member set sales records last year, but the United States will be the main growth driver going forward. Full-year U.S. purchases are set to approach 18 million units in 2016, fueled by a strong labor market, the healthiest household balance sheets in more than a decade and rising replacement demand.”

Purchases in Canada were stronger than expected in 2015, the report said, climbing 3% to a record 1.90 million units, but are forecast to be largely flat in 2016. A double-digit gain in leasing activity accounted for the advance last year, with volumes actually edging down if leasing is excluded. A further moderate advance in British Columbia and the industrial heartland will be offset by ongoing weakness among the resource-rich provinces.

Economic activity continues to gain momentum across Western Europe, and strengthening wage gains, improved access to credit and significant replacement demand lifted sales 8% last year to an estimated 13.1 million — the highest level in six years. “However, even with the latest advance, purchases are still 12% below the average since 2001,” Scotiabank said. “Furthermore, only 4.6% of potential vehicle buyers bought a new car in Western Europe last year, nearly a percentage point below what was normal in the decade prior to 2008. We expect the sales gain to moderate to 4% in 2016, alongside some slowing in the United Kingdom, where volumes have recovered to record highs and a moderation in Spain due to the potential expiry of its vehicle scrappage program by mid-year.”

Purchases are also expected to advance further in the new EU members of Central and Eastern Europe alongside solid export gains and improving labor markets. Eight of the twelve countries in the region posted double-digit gains in car sales last year, lifting volumes to one million units for the first time since 2007.

Auto sales in China have accelerated in recent months, the report continued, and are expected to increase 7% in 2016, buoyed by a 50% reduction in the sales tax to 5% from 10% for new vehicles with engine capacity of less than 1.6 litres, as well as by ongoing stimulative measures designed to boost economic growth. “The tax cut will remain in place through December 2016, and will help lift full-year sales above 21 million units from just under 20 million in 2015,” the report said. “Several leading indicators of vehicle sales, such as money supply and lending activity have also gained momentum in recent months in response to interest rate reductions by the central bank. Infrastructure investment has started to pick up at a time when automakers are expanding their offerings and financing options. Tier 3 and 4 cities in the interior and western China will lead the advance, while licence plate restrictions and environmental concerns limit gains in larger cities.”

India will remain a bright spot for the global auto industry, the report predicts, with sales bolstered by economic growth in excess of 7%, an accommodative central bank, as well as elevated consumer sentiment which is being lifted by the sharp decline in global oil prices since mid-2014.

In contrast, auto demand in Russia and Brazil is forecast to continue to decline alongside ongoing economic contractions and weak commodity prices. “Russia was the weakest auto market in 2015, with sales plunging by nearly 40%,” the report said. “However, Brazil will likely be the laggard over the coming year, with sales posting a further double-digit decline. Brazil is in the midst of the worst economic downturn in decades, with unemployment, inflation and interest rates all rising sharply.”


Print this page

Related Stories

Leave a Reply

Your email address will not be published. Required fields are marked *

*