Strong auto sales have led to a boost in production as inventories fall to record lows.(Paul Sancya/Associated Press)
The auto industry continues to gain traction, with inventories in some parts of the world at record low levels, according to the latest Global Auto Report released by Scotia Economics.
Sales in the U.S. last month jumped almost 50 per cent thanks to the cash for clunkers program, which offered buyers lucrative incentives for scrapping their old gas guzzlers. But the report notes that even when the cash for clunkers sales are excluded, U.S. sales climbed to a nine-month high.
The U.S. sales performance in August was so strong that U.S. dealer inventories fell to a record low of 30 days supply. The normal inventory level is 65 days. “Inventories are currently 20 per cent less than the previous low in August 1983,” Scotiabank economist Carlos Gomes said.
Inventories of Canadian-made models in the U.S. are very low — especially for Toyota Corollas, Honda Civics and Chevy Camaros. Gomes said the stock of Corollas at U.S. dealerships was “virtually non-existent” at the end of August. The Corolla was the most popular car picked in the cash for clunkers program.
Production is rising around the world as a result of low inventories. “Current production plans will add roughly two percentage points to U.S. overall economic activity in the second half of 2009,” the report says. In Canada, the increase in auto assembly activity is expected to add “at least a percentage point” to economic growth in the third and fourth quarters.
But the report notes that output would need to rise at least 20 per cent above current schedules before inventories return to normal levels.
Vehicle sales in Canada remained strong in August, with annualized sales of 1.51 million units. Scotia Economics has boosted its 2009 sales forecast to 1.45 million cars and light trucks and says sales could come in higher than that because several automakers have introduced their own cash for clunkers incentives in Canada.
As rosy as sales and production forecasts are for Canada and the U.S., the bounce-back in some overseas markets is even more impressive. Sales in several emerging markets are at record levels, led by an average 55 per cent year-over-year increase in China, India and Brazil.
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