January 8, 2009

Auto Slump to Worsen in 2009

CARS/POLITICS - A new economic report by Scotia Economics predicts a 10% drop in global auto sales on a year-to-year basis will continue through the first half of 2009.

Scotia Economics says, however, that it expects purchases to stabilize in the second half, limiting the slump to an average of 8% for 2009.

Senior economist Carlos Gomes says the fall-off will be steeper than the 5 per cent average drop in 2008 – the first downturn since 2001. He says actions taken by central banks around the world and stimulus packages being introduced by many governments will lead to some stabilization in vehicle purchases.

Gomes also notes vehicle sales held up better in Canada through October, but are now being pulled lower by the global financial crisis. Purchases fell 21% in December compared to last year, leaving full-year 2008 sales at 1.64 million units – virtually unchanged from 2007.

Scotia Economics expects car sales in 2009 to fall to 1.475 million units, the lowest level since 1998.

Foreign automakers sold 51.2% of vehicles in Canada last year as all three North American automakers saw their share of the market shrink. The Detroit Three's Canadian sales declined by 7.9% to 787,378 vehicles in 2008 while foreign automakers' sales rose 6.3% to 848,608.

Meanwhile, a survey by international accounting and consulting firm KPMG found that nearly half of senior automotive executives believe the industry will be beset by declining revenue growth for the next five years.

The annual survey of global executives found that 77% of respondents expect a dramatic increase in insolvencies, up from 36% last year.

Many pundits say alternative fuels, fuel efficiency, new technologies and emerging markets in the developing world present the chief opportunities for the auto industry over the next three years.

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