Record global auto sales expected in 2017





Global car sales accelerated sharply in the final months of 2016, with sales supported by stronger global economic growth. Gains are expected to continue, albeit more slowly over the coming year with purchases increasing to an eighth consecutive annual record. Increased replacement demand in the U.S. will be complemented by a renewed sales upturn in most emerging markets; however, China is the exception, with an expected slowdown.

“In the United States, we see increased replacement demand, growing consumer confidence and attractive financing options, lifting sales for the third consecutive record year,” said Carlos Gomes, Senior Economist and Auto Industry Specialist at Scotiabank. “Although purchases are expected to decline in China for the first time since 2008, sales in the rest of the emerging world will lead sales gains in 2017 and reverse four consecutive years of decline.”
In contrast, after several years of record vehicle sales in Canada and Mexico, purchases are expected to edge lower in 2017. In Canada, volumes will be undercut by recent price hikes for new cars and light trucks, as well as lower replacement demand than in the United States. Meanwhile, slowing economic growth combined with fiscal restraint, rising interest rates and a weak currency are expected to reduce car sales in Mexico. More than 40% of the vehicles sold in Mexico are imported and the 26% plunge in the Mexican peso versus the US dollar during the first half of 2016 will likely create some sticker shock for many potential car buyers.

 

Sales in emerging markets have lagged in recent years, but are expected to advance in 2017, the first increase since 2012. Gains should be widely distributed, with growth expected in every region for the first time in five years. Eastern Europe is likely to lead the sales gains among emerging markets, though purchases will edge higher in Asia as well, despite lower volumes in China. Activity in South America will also begin to reverse the nearly 40% slump of the past three years, as double-digit declines come to an end in Brazil and purchases begin to move higher in the region’s other markets. Peru has been the most stable auto market in South America in recent years owing to a cushion provided by the expansion of the mining sector.

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