GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
Improving Consumer Fundamentals Drive Sales
Acceleration And Broaden Gains Beyond Autos
RECENT GLOBAL SALES DEVELOPMENTS
CONTACTS
Carlos Gomes
416.866.4735
Scotiabank Economics
carlos.gomes@scotiabank.com
Global car sales remained in the fast lane through the summer, advancing
8% y/y in August and lifting the year-to-date advance to nearly 6% — the
strongest gain in three years. The improvement was driven by a 20% y/y surge
across Asia last month, the best performance since January 2013, as well as by
continued strong gains in Western Europe.
China has been the key driver of the acceleration in car sales across Asia this
year, but purchases have also picked up through the rest of the region. Excluding
China, car sales in Asia climbed 4.4% y/y in August, double the advance through
July. The improvement reflects some pickup in economic activity, especially in the
key high-tech sector which lifted Taiwan’s export orders at a double-digit pace for
the first time since early 2015. Vehicle purchases have also steadied in South
America, with the decline moderating significantly in recent months. While Brazil
continues to post double-digit declines, last month’s decrease was the smallest
since March 2015. Excluding Brazil, car sales in South America have actually
advanced in seven of the past eight months — a sharp reversal from the large and
persistent fall-off through the end of last year.
In contrast, passenger vehicle sales in North America weakened in August, with
lower volumes in both the United States and Canada. We expect the U.S. soft
patch to be temporary, as purchases are likely to pick up as economic activity
gains momentum in the second half of 2016. In fact, preliminary data for
September point to a rebound in U.S. purchases above an annualized 17.5 million
units, up from only 16.9 million in August and a year-to-date average of 17.2
million. Volumes in Canada remained below an annualized 1.9 million units in
August, the second consecutive month that sales were below the full-year 2015
average. However, activity has been distorted over the summer by large declines
at one manufacturer, and volumes continue to move higher for the rest of the
industry.
Chart 1
Consumer Spending
Gains Momentum
3
y /y % change
61.8
%
Consumer
Spending OECD, LHS
2
61.6
61.4
1
61.2
Consumer Spending
Share of Economic
Activity - OECD, RHS
61.0
0
11
13
15
Source: OECD, Scotiabank Economics.
HEALTHY CONSUMER DRIVES GLOBAL SALES ACCELERATION
Global car sales have been stronger than expected this year, but the
acceleration in consumer spending has been much broader than just the
auto sector, and is being driven by improving household fundamentals.
Labour markets have gained momentum across most regions, reducing
unemployment in OECD countries to the lowest level in nearly a decade and lifting
incomes at the fastest pace since the global expansion began in mid-2009.
Household balance sheets also continue to be buoyed by ongoing asset price
appreciation, helping to broaden the advance in overall consumer purchases. As a
result, consumers are increasing their market share of overall global
economic activity. Furthermore, even with record global auto sales,
purchases in developed markets still remain below historical averages and
significant replacement demand remains in most countries, pointing to an
automotive market with further “room to run”.
Employment growth among OECD countries has strengthened to 1.5 % y/y in
recent months, the best performance in nearly a decade, helping to boost
household purchasing power and lift overall consumer purchases to a near-record
Chart 2
U.S. Auto Cycle Still Has
Room to Run
3
y /y % change
0
% of ov erall
retail activ ity
16
Employment,
LHS
14
12
-3
10
New Auto
Sales, RHS
-6
8
02
04
06
08
10
12
14
Source: U.S. BEA, Census Bureau,
Scotiabank Economics.
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16
1
GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
62% of overall economic activity (see chart 1). In fact, consumer spending has accelerated across the OECD and is now
advancing at the fastest pace since mid-2009. Real income growth has also picked up, and household wealth continues to gain
momentum, advancing in excess of 5% y/y in Canada, 3% in the United States and has been steadily improving in recent years
across Europe.
Rising incomes and household wealth provide a positive backdrop for overall consumer spending and the vehicle sales outlook,
which, while improving, still remains below historical averages relative to both population and income trends. For example, in the
U.S. and Canada, household spending at motor vehicle dealers normally accounts for more than 20% of overall retail activity, with
new vehicle purchases normally representing 12-13% of overall retail purchases. As chart 2 demonstrates, while new vehicle sales
have been climbing, spending on new cars and light trucks in the United States still remains well below historical averages, even
as employment growth has been much stronger than during the previous economic cycle. Furthermore, real non-automotive
spending has been accelerating in the United States and is now advancing 3% y/y — the fastest growth since 2006 and nearly
50% above the pace of expansion from mid-2009 through 2015.
A similar trend is also evident across Europe, with real non-automotive retail sales rising 3% y/y for the members of the EU 19.
This represents the largest gain of the past decade and a sharp reversal from the declines that remained in place from early 2008
through late 2013. Spain and Sweden are leading the way, but most countries are posting solid gains. The advance is even
stronger in Eastern Europe, with several nations reporting increases in real non-automotive spending that is approaching a doubledigit pace.
Overall consumer spending has also broadened across Asia, and is now advancing by more than 4% y/y, more than double the
pace evident in early 2015. India is leading the way, with consumer spending jumping nearly 7% y/y. However, most other
countries in the region are reporting consumer spending gains that are hovering around 4% y/y, a much stronger performance than
overall economic growth. Japan is the exception, with aging consumers continuing to lag. However, even on the island nation,
consumer purchases turned positive year-over-year in the second quarter, advancing at the fastest pace in two and a half years.
Some improvement is also becoming evident across South America. During the second quarter, consumer spending outside of
Brazil climbed 2% y/y, led by a 3.5% gain in Peru and 2.5% advances in both Chile and Colombia. The decline in consumer
purchases even moderated in Brazil, alongside some improvement in confidence and a pickup in business investment, much of it
geared to the auto industry.
The improving trend in consumer activity across the globe points to an eventual upturn in production and trade. However, the
rebound continues to be delayed by ongoing geopolitical, business and other uncertainties.
INTERNATIONAL CAR SALES OUTLOOK
(m illions of units )
1990-99
2000-12
2013
2014
2015
2016f
39.20
16.36
1.27
14.55
0.54
52.57
17.68
1.59
15.12
0.97
68.65
18.33
1.74
15.53
1.06
71.18
19.42
1.85
16.44
1.13
72.61
20.64
1.90
17.39
1.35
75.76
21.01
1.96
17.50
1.55
13.11
3.57
13.96
3.27
11.55
2.95
12.11
3.04
13.20
3.21
13.86
3.33
Eastern Europe
Rus s ia
1.18
0.78
2.95
1.75
4.04
2.78
3.81
2.49
3.15
1.60
3.05
1.42
Asia
China**
India
6.91
0.43
0.31
15.01
5.77
1.13
29.98
16.30
1.83
31.69
18.37
1.87
32.29
20.01
2.06
34.84
22.41
2.10
South Am erica
Brazil
1.64
0.94
2.97
1.84
4.75
2.76
4.15
2.50
3.33
1.82
3.00
1.45
TOTAL SALES
North Am erica*
Canada
United States
Mexico
W estern Europe
Germ any
*Includes light trucks. **Includes cros sover utility vehic les f rom 2005.
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2
GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
CANADA/U.S. MOTOR VEHICLE SALES OUTLOOK
1991-05
Average
CANADA
Cars
Dom es tic
Trans plants
Im ports
Light Trucks
2006-13
15.5
8.3
7.2
NORTH AMERICAN
PRODUCTION*
CANADA
UNITED STATES
MEXICO
2015
(thous ands of units , annualized)
1,618
1,851
786
759
488
512
270
329
298
247
832
1,092
(m illions of units , annualized)
13.8
16.4
6.7
7.7
7.1
8.7
1,398
797
583
178
214
601
UNITED STATES
Cars
Light Trucks
2014
(m illions of units , annualized)
13.86
17.43
2.22
2.39
9.27
11.67
2.37
3.37
15.58
2.50
11.67
1.41
2016
Jan-July**
Annual f
1,898
714
476
327
238
1,184
1,959
678
454
311
224
1,281
1,955
680
450
315
230
1,275
17.4
7.5
9.9
17.3
6.9
10.4
17.5
7.0
10.5
17.95
2.28
12.10
3.57
18.20
2.45
12.20
3.55
18.20
2.40
12.25
3.55
*Inc ludes transplants; light, medium and heavy truc ks. **Canadian sales are Sc otiabank estimates.
VEHICLE SALES OUTLOOK BY PROVINCE*
(thous ands of units , annual rates )
2016
Jan-July**
Annual f
1994-05
Average
2006-13
2014
2015
1,446
1,618
1,851
1,898
1,959
1,955
ATLANTIC
102
121
137
140
139
140
CENTRAL
Quebec
Ontario
936
366
570
1,002
410
592
1,139
420
719
1,205
444
761
1,272
464
808
1,271
470
801
W EST
Manitoba
Sas katchewan
Alberta
Britis h Colum bia
408
42
36
166
164
495
47
48
227
173
575
56
56
269
194
553
56
54
236
207
548
56
52
222
218
544
56
53
220
215
CANADA
*Includes cars and light trucks . **Scotiabank es tim ates .
900
300
thousands of units
70
thousands of units
275
800
60
250
700
225
Ontario
50
200
600
175
500
British
Columbia
150
Quebec
400
40
30
100
75
50
80
84
88
92
96
00
Manitoba
125
300
200
thousands of units
Alberta
04
08
12
16
Saskatchewan
Atlantic
80
84
88
92
96
00
04
08
12
16
20
80
84
88
92
96
00
04
08
12
16
Includes cars and trucks (light, medium and heavy).
Shaded bars indicate U.S. recession periods.
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3
GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
AUTO MARKET SHARE BY MANUFACTURER — CANADA*
(thous ands of units , not s eas onally adjus ted)
TOTAL
Big Three
General Motors
Ford
Chrys ler
Japanes e
Honda
Toyota
Nis s an
Mazda
Mits ubis hi
Subaru
Hyundai
Volks wagen
Kia
BMW
Mercedes -Benz
Other
2015
Jan to Aug
Units
% of Total
2016
Jan to Aug
Units
% of Total
501.6
109.7
48.2
39.0
22.5
100.0
21.9
9.6
7.8
4.5
465.4
95.3
45.6
33.9
15.8
100.0
20.5
9.8
7.3
3.4
64.6
13.5
6.2
5.2
2.1
100.0
20.9
9.6
8.1
3.2
58.6
11.4
6.0
3.7
1.7
100.0
19.4
10.3
6.3
2.8
213.2
64.4
66.5
35.2
29.8
6.7
10.7
42.5
12.8
13.3
7.0
5.9
1.3
2.1
202.1
63.5
63.7
35.0
22.3
7.0
10.5
43.4
13.7
13.7
7.5
4.8
1.5
2.3
27.3
9.2
8.2
4.3
3.6
0.9
1.1
42.3
14.2
12.8
6.7
5.6
1.4
1.7
24.5
8.0
7.5
4.0
2.8
0.8
1.5
41.9
13.7
12.7
6.8
4.9
1.3
2.4
61.5
41.3
31.8
16.4
14.9
12.8
12.3
8.2
6.3
3.3
3.0
2.5
60.2
34.1
29.4
15.7
15.3
13.3
12.9
7.3
6.3
3.4
3.3
2.9
8.7
5.5
4.3
2.0
1.7
1.6
13.5
8.5
6.6
3.1
2.7
2.4
8.8
4.2
3.9
2.0
2.0
1.8
15.0
7.2
6.7
3.3
3.4
3.1
2015
Aug
Units
% of Total
2016
Aug
Units
% of Total
*Source: Dealer sales from the Global Automakers of Canada.
TRUCK MARKET SHARE BY MANUFACTURER — CANADA*
(thous ands of units , not s eas onally adjus ted)
2015
Jan to Aug
Units
% of Total
2016
Jan to Aug
Units
% of Total
2015
Aug
Units
% ot Total
Units
2016
Aug
% of Total
TOTAL
Big Three
General Motors
Ford
Chrys ler
809.4
456.6
126.5
148.9
181.2
100.0
56.4
15.6
18.4
22.4
888.9
486.1
128.4
174.8
182.9
100.0
54.7
14.4
19.7
20.6
113.8
64.7
18.4
21.4
24.9
100.0
56.9
16.2
18.8
21.9
115.7
61.7
16.5
25.3
19.9
100.0
53.3
14.3
21.8
17.2
Other Dom es tic
28.8
3.6
24.8
2.8
3.5
3.0
3.1
2.7
218.8
52.3
75.1
52.3
19.0
7.6
20.2
27.0
6.5
9.3
6.5
2.3
0.9
2.5
251.4
60.7
86.6
57.5
24.5
8.2
22.1
28.3
6.8
9.7
6.5
2.7
0.9
2.5
31.1
8.1
10.1
7.5
3.2
1.4
2.2
27.4
7.1
8.8
6.6
2.8
1.3
2.0
35.3
9.8
11.2
7.5
3.7
1.3
3.1
30.5
8.5
9.7
6.5
3.2
1.1
2.6
Hyundai
Kia
33.4
15.9
4.1
2.0
40.4
21.5
4.5
2.4
4.3
2.0
3.7
1.8
4.6
2.8
4.0
2.4
Other Im ports
55.9
6.9
64.7
7.3
8.2
7.2
8.2
7.1
LIGHT TRUCKS
785.4
97.0
869.7
97.8
110.9
97.5
113.5
98.1
Japanes e
Honda
Toyota
Nis s an
Mazda
Mits ubis hi
Subaru
*Source: Dealer sales f rom the Global A utomakers of Canada.
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4
GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
AUTO SALES BY PROVINCE
(thous ands of units , not s eas onally adjus ted)
CANADA
ATLANTIC
Newfoundland
Nova Scotia
New Bruns wick
Prince Edward Is land
CENTRAL
Quebec
Ontario
W EST
Manitoba
Sas katchewan
Alberta
Britis h Colum bia
2015
Jan to July
2016
Jan to July
2015
July
2016
July
436.4
405.4
66.7
59.1
34.5
7.2
14.7
10.4
2.2
30.1
6.3
12.6
9.2
2.0
5.9
1.2
2.5
1.8
0.4
3.8
0.8
1.7
1.0
0.3
306.2
133.6
172.6
286.1
123.5
162.6
46.6
20.8
25.8
42.7
18.8
23.9
95.7
9.6
6.6
32.4
47.1
89.2
8.8
5.6
29.4
45.4
14.2
1.7
1.1
4.6
6.8
12.6
1.5
0.8
4.0
6.3
TRUCK SALES BY PROVINCE*
(thous ands of units , not s eas onally adjus ted)
2015
Jan to July
2016
Jan to July
2015
July
2016
July
698.2
776.6
114.5
116.9
50.2
13.6
18.0
16.1
2.5
56.7
14.4
20.3
18.7
3.3
9.2
2.5
3.3
2.9
0.5
8.1
1.9
3.1
2.6
0.5
CENTRAL
Quebec
Ontario
412.4
132.8
279.6
483.0
157.3
325.7
66.9
21.7
45.2
73.4
24.4
49.0
W EST
Manitoba
Sas katchewan
Alberta
Britis h Colum bia
235.6
23.2
25.1
110.7
76.6
236.9
24.5
24.4
101.9
86.1
38.4
3.9
4.1
17.7
12.7
35.4
3.6
3.7
15.1
13.0
CANADA
ATLANTIC
Newfoundland
Nova Scotia
New Bruns wick
Prince Edward Is land
*Light, medium and heavy trucks.
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5
GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
CANADIAN MOTOR VEHICLE PRODUCTION*
(thous ands of units , not s eas onally adjus ted)
2015
Jan to Aug
2016
Jan to Aug
2015
Aug
2016
Aug
1,462.1
1,597.0
208.4
217.9
CAR
Chrys ler
GM
Honda
Toyota
601.4
173.1
138.8
122.1
167.4
542.4
162.4
80.6
138.3
161.1
78.1
23.3
17.9
15.6
21.3
75.9
24.8
10.9
19.1
21.1
TRUCKS**
Chrys ler
Ford
GM
Honda
Toyota
Others
860.7
121.5
115.8
247.1
136.2
229.7
10.4
1,054.6
210.7
186.0
267.4
139.7
242.3
8.5
130.3
33.3
15.6
34.3
16.7
29.1
1.3
142.0
26.8
24.3
40.8
16.2
32.7
1.2
TOTAL
*Production data f rom 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 16
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 16
-30
2016 data are January-July annualized.
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6
GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
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
16
-15
*Scotiabank estimate from Canadian Black Book data.
Scotiabank Car Price Indicators — Canada
20
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
6
8
6
4 Year
4
4
2
7980
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
14
16
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
25
98
00
-5
02
04
06
08
10
12
14
16
-15
Consumer price indices for new and used cars.
Shaded areas indicate recession periods.
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7
GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
CANADIAN CORPORATE FINANCIAL PERFORMANCE
MOTOR VEHICLE DEALERS AND REPAIR SHOPS
Annual
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Quarterly at annual rates
2015Q2
Q3
Q4
2016Q1
Q2
Net Incom e
After Tax
($ m il)
594
571
799
942
1089
1142
1392
1649
1664
1748
2215
2740
2854
Pre-Tax
Profit
Margin (%)
0.91
0.69
0.93
1.20
1.41
1.43
1.84
2.06
1.99
1.97
2.32
2.65
2.57
3124
3244
2988
1964
3136
2.61
2.76
2.65
1.93
2.43
929
-68
1.28
0.10
Average (89-15)
Low (89-15)
Def inition of Ratios:
Pre-tax Prof it Margin: pre-tax income/sales
Inventory Turnover Ratio: sales/inventory
Inventory
Turnover
Ratio
5.30
4.98
5.35
5.16
5.05
5.04
5.34
4.91
5.17
4.86
5.08
5.10
5.07
Interes t
Coverage
Ratio
2.65
2.25
2.55
2.64
3.36
3.51
4.85
5.34
5.19
5.32
6.64
7.56
7.81
Debt/
Equity
Ratio
2.91
3.17
2.74
2.75
2.56
2.44
2.07
2.11
2.02
2.03
2.02
1.86
1.87
Return on
Shareholders
Equity (%)
10.14
10.49
12.90
14.37
15.13
14.66
16.99
18.09
17.44
16.71
20.08
20.90
20.50
5.41
5.32
4.98
4.57
5.33
8.14
8.80
7.57
6.52
8.73
1.92
1.82
1.84
1.94
1.91
23.07
23.05
20.63
13.75
21.45
6.03
4.38
3.30
1.10
2.33
3.57
12.05
-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: af ter-tax income/total equity
Retail Auto Dealer Bankruptcies
10
10
number of bankruptcies
8
8
2014
2013
6
6
2012
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.
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GLOBAL ECONOMICS
| GLOBAL AUTO REPORT September 29, 2016
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9