According to the Global Auto Report released Thursday by Scotia Economics, global car sales powered ahead in September, posting the strongest year-over-year increase since May, a reversal from several months of weakness. The improvement was led by the emerging markets of Russia, India and China, but virtually every region reported higher volumes.
"The Canadian auto industry is bouncing back, with vehicle production surging by 56 percent in the year to September, outpacing a 49 percent increase in the United States," said Carlos Gomes, Senior Economist, Scotia Economics. "Employment has picked up, mainly in vehicle assemblies. However, vehicle exports remain almost exclusively destined to a US market that has limited upside potential in a period of protracted household and fiscal consolidation, limiting Canada's growth opportunities. In fact, Canada is the only major auto manufacturing nation that relies almost exclusively on one export market, and is not diversified and well positioned to benefit from rapid sales gains in emerging markets."
According to the report, Canada and Mexico have benefitted from the integration of the North American auto industry under the North American Free Trade Agreement (NAFTA). Canada's share of North American vehicle output climbed to 17 percent in 2009 and has advanced to 17.4 percent so far this year, up from an average of 16 percent over the past two decades. Mexico's share gain has been even greater based on its low-cost platform, with vehicle output overtaking Canada last year, and now garnering nearly 18 percent of overall North American vehicle assemblies. Both countries remain heavily dependent on exports to the US, with Canada the largest vehicle exporter, and Mexico in third place behind Germany.
Canada continues to rely on the US for the destination of virtually all its motor vehicle exports. In contrast, Mexico has been diversifying its export base over the past decade, reducing the share destined to its NAFTA partners to just over 70 percent currently, from about 95 percent a decade ago.
The US now ships nearly 60 percent of its overall vehicle exports overseas. In fact, despite the sharp downturn in global vehicle sales and production last year, the US still exported nearly one million cars and trucks overseas in 2009, up from less than 800,000 units five years ago. Germany, Saudi Arabia, the UAE (United Arab Emirates) and the United Kingdom have historically been the largest purchasers of US cars and light trucks. However, US exports to China have been surging at an astonishing rate so far this year, climbing nearly fivefold, to surpass Germany as the third-largest market for US-made cars and trucks - behind Canada and Mexico. In fact, China and the other fast-growing BRIC (Brazil, Russia, India and China) markets now account for nearly 10 percent of overall US vehicle exports, up from virtually nothing a decade ago.