Other Emerging Markets are also Rebounding
With the exception of Russia, where purchases remain in hibernation, car sales have recently climbed to record highs in the other key emerging markets of Brazil and India. In Brazil, a combination of tax breaks, lower prices and improved confidence lifted sales to a record annual rate of 3.1 million units in June, 21 per cent above a year earlier, and the third increase in the past four months. Year-to-date sales have advanced four per cent in Brazil, led by a 28 per cent surge at Ford - the fourth-largest automaker in Brazil.
Conditions are also stabilizing in India, with the decline in business sentiment starting to be reversed alongside significant monetary stimulus. Car sales have climbed by nine per cent so far this year and will be bolstered in coming months by the recent launch of the low-cost Tata Nano.
In Western Europe, government scrappage programs have led to stronger-than-expected car sales in the first half of 2009. However, the improvement in other indicators has lagged.
"Unemployment in Western Europe continues to move higher and further labour market adjustment lies ahead," said Mr. Gomes. "As a result, we expect car sales in Western Europe to soften next year, as the boost from the scrappage programs fades."
North America Passes the Inflection Point
Sales in North America bottomed in the opening months of 2009, and will be buoyed in coming months by the recently implemented "cash-for-clunkers" program in the United States. The legislation provides consumers with trade-in vouchers up to $4,500 US to buy a new vehicle, provided that their new car gets 10 miles-per-gallon (mpg) better gas mileage than the trade-in model. For light trucks, the improvement must be five mpg better than the replacement model.
Other leading indicators of auto sales, such as used car prices and consumer sentiment are also on the mend in both the United States and Canada, pointing to stronger sales ahead. In the United States, used car prices have increased year-over-year for two consecutive months for the first time since October 2007 and just before the advent of the latest U.S. recession. In Canada, used car prices are now roughly unchanged from a year earlier, the best performance since mid-2006, and a significant improvement from nearly a double-digit decline last summer.
"Economic activity is poised to get a much needed shot in the arm from the auto industry revival," concluded Mr. Gomes. "With sales on the upswing and industry-wide inventories back down to normal levels, the re-start of idled auto assembly plants will boost third-quarter economic activity across North America by roughly two percentage points. This represents a sharp reversal from the past nine months, when the economic downturn was intensified by significant auto industry cutbacks."
photo:Jupiter Images
With the exception of Russia, where purchases remain in hibernation, car sales have recently climbed to record highs in the other key emerging markets of Brazil and India. In Brazil, a combination of tax breaks, lower prices and improved confidence lifted sales to a record annual rate of 3.1 million units in June, 21 per cent above a year earlier, and the third increase in the past four months. Year-to-date sales have advanced four per cent in Brazil, led by a 28 per cent surge at Ford - the fourth-largest automaker in Brazil.
Conditions are also stabilizing in India, with the decline in business sentiment starting to be reversed alongside significant monetary stimulus. Car sales have climbed by nine per cent so far this year and will be bolstered in coming months by the recent launch of the low-cost Tata Nano.
In Western Europe, government scrappage programs have led to stronger-than-expected car sales in the first half of 2009. However, the improvement in other indicators has lagged.
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"Unemployment in Western Europe continues to move higher and further labour market adjustment lies ahead," said Mr. Gomes. "As a result, we expect car sales in Western Europe to soften next year, as the boost from the scrappage programs fades."
North America Passes the Inflection Point
Sales in North America bottomed in the opening months of 2009, and will be buoyed in coming months by the recently implemented "cash-for-clunkers" program in the United States. The legislation provides consumers with trade-in vouchers up to $4,500 US to buy a new vehicle, provided that their new car gets 10 miles-per-gallon (mpg) better gas mileage than the trade-in model. For light trucks, the improvement must be five mpg better than the replacement model.
Other leading indicators of auto sales, such as used car prices and consumer sentiment are also on the mend in both the United States and Canada, pointing to stronger sales ahead. In the United States, used car prices have increased year-over-year for two consecutive months for the first time since October 2007 and just before the advent of the latest U.S. recession. In Canada, used car prices are now roughly unchanged from a year earlier, the best performance since mid-2006, and a significant improvement from nearly a double-digit decline last summer.
"Economic activity is poised to get a much needed shot in the arm from the auto industry revival," concluded Mr. Gomes. "With sales on the upswing and industry-wide inventories back down to normal levels, the re-start of idled auto assembly plants will boost third-quarter economic activity across North America by roughly two percentage points. This represents a sharp reversal from the past nine months, when the economic downturn was intensified by significant auto industry cutbacks."
photo:Jupiter Images