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March 6, 2015
Global Economics
Global Auto Report
Carlos Gomes 416.866.4735
carlos.gomes@scotiabank.com
North America Leads Global Heavy Truck Recovery
Recent Global Car/Light Truck Sales Developments
Developed Markets Lift
Global Heavy Truck Volumes
Global passenger vehicle sales started the year with a solid gain,
advancing 6% above a year earlier. China and the United States
led the way with double-digit advances, but purchases also
gained momentum across Western Europe, rising 6.5% alongside
improving economic conditions. In fact, sales climbed in all of the
five largest European markets last month, lifting the annualized
sales pace to the highest level since late 2011.
600
In contrast, outside of China, car sales across Asia are being held
back by ongoing double-digit declines in both Japan and Thailand.
Activity also remains weak across South America, with most
countries — except Colombia — reporting a double-digit fall-off in
January, a trend that has been in place since last spring.
400
thousands of units
thousands of units
Developed
Economies
550
1500
1400
500
1300
450
1200
Developing
Economies
1100
350
forecast
300
2010
2011
2012
2013
2014
2015
1000
Source: Company Reports, Scotiabank Economics.
More recent data for February point to continued solid gains in
North America, with volumes in both Canada and the United States
advancing above a year earlier. In Canada, car and light truck sales
rose 3% y/y alongside record light truck purchases for the month of
February. Meanwhile, U.S. passenger vehicle sales climbed
5% y/y, buoyed by a strengthening job market, elevated consumer
confidence and low interest rates and fuel prices. As in Canada,
light trucks led the way, with SUV sales surging 23% above a year
earlier, largely due to a 45% spike in purchases of large SUVs.
Rising Freight Volumes Lift Global Heavy Truck Market
300
Decade-High Heavy Truck
Demand In North America
thousands of units
thousands of units
250
200
60
50
Class 8
Orders
40
150
30
100
20
Heavy truck demand has been on a steep ascent across
50
10
Class 8 Order
Backlog
North America over the past year, is improving in parts of
0
0
Asia, and has started to stabilize across Western Europe.
2004
2006
2008
2010
2012
2014
This performance sets the stage for a rebound in global sales
Source: Bloomberg, Scotiabank Economics.
and production in 2015. However, the rise will be tempered by
ongoing weakness across Latin America and softer demand in China — the world’s largest truck market
— due to the introduction of new fuel emission standards on January 1, 2015.
The North American heavy truck industry has been improving over the past two years, with gains accelerating in
recent months alongside record freight volumes. Truck production has ramped up to the highest level in nearly a
decade, and further gains are on the horizon as the order backlog has surged by more than 70% over the past
year and is approaching 200,000 units for the first time since 2006. Furthermore, with industrial activity across
North America expected to advance nearly 4% again this year, and fuel prices sharply lower, industry
profitability is on the rise.
According to ACT Research, orders for class 8 trucks (vehicles weighing in excess of 33,000 pounds) surged
more than 40% in North America last year, jumping to the highest level since 2004. Production increased 21% in
2014 and is expected to exceed 300,000 units this year for the first time in nearly a decade. However, even with
accelerating truck output, record freight volumes have led to demand growth outstripping supply.
Scotiabank Economics
Scotia Plaza 40 King Street West, 63rd Floor
Toronto, Ontario Canada M5H 1H1
Tel: 416.866.6253 Fax: 416.866.2829
Email: scotia.economics@scotiabank.com
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank.
Opinions, estimates and projections contained herein are our own as of the date hereof and are
subject to change without notice. The information and opinions contained herein have been
compiled or arrived at from sources believed reliable but no representation or warranty, express or
implied, is made as to their accuracy or completeness. Neither Scotiabank nor its affiliates accepts
any liability whatsoever for any loss arising from any use of this report or its contents.
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Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Global Auto Report is available on scotiabank.com, Bloomberg at SCOT and Reuters at SM1C
March 6, 2015
Global Economics
Global Auto Report
Aside from rising freight tonnage, an aging fleet is also supporting higher truck sales. North American retail sales have been
below 250,000 units — the annual replacement level required by the industry — in six of the past seven years, and the average
age of the trucking fleet still remains near the record 9.6 years set in 2013. Many class 8 trucks purchased during the last cycle
peak between 2004 and 2008 are still in operation and are the prime replacement candidates, following several years of
minimal fleet expansion. However, it will take several years to lower the average age of the fleet. In addition, truck utilization
rates have exceeded 98% since mid-2013, the highest level in a decade and nearly 10 percentage points higher than what was
normal prior to the global economic downturn.
While North America is leading the recovery in the heavy truck market, conditions are gradually starting to improve in Western
Europe. In particular, strengthening purchasing managers’ indexes — which act as a leading indicator for the heavy truck
market — climbed to a seven-month high in February, with new orders posting the largest gain since May 2011. This represents
a key development for the global trucking industry, as a significantly higher percentage of freight is carried by trucks in Europe
than North America. According to Eurostat, more than 74% of all freight traffic within the European Union is carried on the road
by the trucking industry. This compares with a more balanced market share in North America, where both trucks and rail
typically have between a 30% to 40% share of the overall freight market.
In fact, new heavy truck sales in Western Europe appear to have started to turn the corner, rising 8% y/y in January, led by
solid gains of 58% in the United Kingdom and 22% in Germany — the two strongest economies in Western Europe. This
represents a significant improvement from a 6% slide in heavy truck demand last year, with a majority of countries reporting
lower sales, due to increased pre-ordering activity in 2013 ahead of the introduction of the Euro 6 emission standards last year.
While Canada no longer produces heavy trucks, the improvement in North American commercial truck demand represents a
positive development for several Canadian provinces. In particular, tires are one of Nova Scotia’s main exports, as a major
global tire manufacturer operates several plants in the province, including a facility dedicated to the heavy truck market. Tire
exports from Nova Scotia jumped 8% last year to a record $1.1 billion, and accounted for more than 70% of the province’s
overall manufacturing exports. Given the strength of the North American truck market, the facility received a new investment of
$73 million last year. A facility in Quebec still builds medium-size trucks for North America, while several Canadian
manufacturers continue to assemble trailers.
In contrast to strengthening demand in North America, Western Europe and parts of Asia, the heavy truck market continues to
weaken in Latin America, especially Brazil, which accounts for more than 70% of overall sales in the region. Heavy truck purchases in
Brazil posted a double-digit decline last year and an even sharper fall-off is likely in 2015 alongside declining industrial activity. Sales
in China — which represent about two-thirds of overall volumes in Asia — are also expected to post a mid-single-digit decline in 2015,
undercut by some pre-ordering activity in 2014, prior to the introduction of new emission standards earlier this year.
International Car Sales Outlook
(m illions of units )
1990-99
2000-11
2012
2013
2014
2015f
39.20
16.36
1.27
14.55
0.54
51.55
17.74
1.59
15.18
0.97
64.98
17.11
1.68
14.44
0.99
68.69
18.33
1.74
15.53
1.06
71.15
19.42
1.85
16.44
1.13
73.92
20.04
1.86
17.00
1.18
13.11
3.57
14.14
3.29
11.76
3.08
11.55
2.95
12.10
3.04
12.59
3.17
Eastern Europe
Rus s ia
1.18
0.78
2.85
1.66
4.14
2.93
4.08
2.78
3.79
2.49
3.60
2.02
Asia
China**
India
6.91
0.43
0.31
13.99
5.15
1.06
27.25
13.18
2.02
29.98
16.30
1.83
31.69
18.37
1.88
33.75
19.65
1.97
South Am erica
Brazil
1.64
0.94
2.83
1.75
4.72
2.84
4.75
2.76
4.15
2.50
3.94
2.37
TOTAL SALES
North Am erica*
Canada
United States
Mexico
W estern Europe
Germ any
*Includes light trucks. **Includes cros sover utility vehic les f rom 2005.
2
March 6, 2015
Global Economics
Global Auto Report
Canada/U.S. Motor Vehicle Sales Outlook
1991-05
Average
CANADA
Cars
Dom es tic
Trans plants
Im ports
Light Trucks
2006-11
2013
15.5
8.3
7.2
(thous ands of units , annualized)
1,587
1,677
1,745
795
760
761
489
470
493
268
280
300
306
290
268
792
917
984
(m illions of units , annualized)
13.4
14.4
15.5
6.6
7.2
7.6
6.8
7.2
7.9
15.58
2.50
11.67
1.41
(m illions of units , annualized)
13.10
15.77
16.49
2.15
2.46
2.38
8.80
10.30
11.06
2.15
3.01
3.05
1,398
797
583
178
214
601
UNITED STATES
Cars
Light Trucks
NORTH AMERICAN
PRODUCTION*
CANADA
UNITED STATES
MEXICO
2012
2014
2015f
1,851
759
512
323
247
1,092
1,855
760
510
330
250
1,095
16.4
7.7
8.7
17.0
7.9
9.1
17.43
2.39
11.67
3.37
18.02
2.43
12.06
3.53
*Inc ludes transplants; light, medium and heavy truc ks. **Canadian sales are Sc otiabank estimates.
Vehicle Sales Outlook By Province*
(thous ands of units , annual rates )
1994-05
Average
2006-11
2012
2013
2014
2015f
1,446
1,587
1,677
1,745
1,851
1,855
ATLANTIC
102
119
126
135
137
137
CENTRAL
Quebec
Ontario
936
366
570
987
408
579
1,034
416
618
1,061
415
646
1,139
420
719
1,149
423
726
W EST
Manitoba
Sas katchewan
Alberta
Britis h Colum bia
408
42
36
166
164
481
45
45
220
171
517
50
55
239
173
549
54
58
257
180
575
56
56
269
194
569
56
55
263
195
CANADA
*Includes cars and light trucks . **Scotiabank es tim ates .
800
300
thousands of units
70
thousands of units
275
700
60
250
Ontario
225
600
175
British
Columbia
150
Quebec
40
125
30
100
300
200
75
50
80
84
88
92
96
00
Manitoba
50
200
500
400
thousands of units
Alberta
04
08
12
Saskatchewan
Atlantic
80
84
88
92
96
00
04
08
12
20
80
84
88
92
96
00
04
08
12
Includes cars and trucks (light, medium and heavy).
Shaded bars indicate U.S. recession periods.
3
March 6, 2015
Global Economics
Global Auto Report
Auto Market Share By Manufacturer — Canada*
(thous ands of units , not s eas onally adjus ted)
2014
Jan to Feb
Units
% of Total
TOTAL
Big Three
General Motors
Ford
Chrys ler
Japanes e
Honda
Toyota
Nis s an
Mazda
Mits ubis hi
Subaru
Hyundai
Volks wagen
Kia
BMW
Mercedes -Benz
Other
2014
Jan to Feb
Units
% of Total
2015
Feb
Units
% of Total
2016
Feb
Units
% of Total
77.6
17.5
6.8
5.9
4.8
100.0
22.6
8.7
7.6
6.3
76.1
13.8
5.9
4.3
3.6
100.0
18.2
7.8
5.7
4.7
41.0
9.4
4.1
3.1
2.2
100.0
22.8
9.9
7.6
5.3
40.9
7.2
3.1
2.3
1.8
100.0
17.6
7.5
5.6
4.5
32.8
9.3
9.8
5.1
5.8
1.4
1.5
42.3
11.9
12.7
6.5
7.4
1.8
2.0
33.3
8.4
11.3
6.3
4.5
1.1
1.7
43.8
11.1
14.9
8.3
6.0
1.4
2.2
17.2
4.7
5.3
2.7
3.1
0.8
0.7
41.9
11.5
12.8
6.5
7.4
1.8
1.8
18.0
4.4
6.3
3.5
2.5
0.5
0.9
44.0
10.7
15.4
8.5
6.0
1.3
2.1
9.8
5.8
5.8
1.7
2.4
1.8
12.6
7.4
7.4
2.2
3.2
2.3
9.7
7.1
4.8
2.9
2.6
1.9
12.7
9.3
6.4
3.8
3.4
2.4
5.4
2.9
3.2
0.9
1.1
0.9
13.2
7.0
7.8
2.3
2.7
2.3
5.0
3.8
2.8
1.8
1.4
0.9
12.3
9.2
6.8
4.3
3.5
2.3
Units
2015
Feb
% of Total
*Source: Dealer sales f rom the Global Automakers of Canada.
Truck Market Share By Manufacturer — Canada*
(thous ands of units , not s eas onally adjus ted)
2014
Jan to Feb
Units
% of Total
2015
Jan to Feb
Units
% of Total
TOTAL
Big Three
General Motors
Ford
Chrys ler
128.2
73.4
17.2
24.8
31.4
100.0
57.3
13.4
19.4
24.5
136.6
78.0
19.5
25.3
33.2
100.0
57.1
14.3
18.5
24.3
66.8
38.4
8.9
13.1
16.4
100.0
57.5
13.4
19.6
24.5
70.3
40.3
10.7
12.7
16.9
100.0
57.4
15.3
18.1
24.0
Other Dom es tic
5.2
4.1
5.2
3.8
2.5
3.7
2.5
3.5
32.4
7.3
11.5
8.1
2.3
1.6
3.2
25.2
5.7
9.0
6.3
1.8
1.3
2.5
35.4
7.5
13.2
8.7
2.5
1.2
3.5
25.9
5.5
9.7
6.4
1.8
0.9
2.6
16.7
4.1
5.7
4.1
1.2
0.9
1.7
25.1
6.1
8.5
6.2
1.8
1.4
2.5
18.1
3.9
6.7
4.5
1.3
0.6
1.7
25.8
5.6
9.5
6.3
1.9
0.9
2.5
Hyundai
Kia
5.0
2.5
3.9
2.0
5.5
3.1
4.0
2.3
2.7
1.2
4.0
1.8
3.3
1.4
4.7
2.0
Other Im ports
9.7
7.5
9.4
6.9
5.3
7.9
4.7
6.6
123.8
96.5
132.1
96.7
64.6
96.8
68.2
97.0
Japanes e
Honda
Toyota
Nis s an
Mazda
Mits ubis hi
Subaru
LIGHT TRUCKS
2014
Feb
Units
% ot Total
*Source: Dealer sales f rom the Global A utomakers of Canada.
4
March 6, 2015
Global Economics
Global Auto Report
Auto Sales By Province
(thous ands of units , not s eas onally adjus ted)
2013
Jan to Dec
2014
Jan to Dec
2013
Dec
2014
Dec
761.4
758.5
43.1
47.8
64.9
14.4
27.4
19.1
4.0
62.0
13.3
26.4
18.5
3.8
3.1
0.7
1.4
0.9
0.1
3.5
0.9
1.5
0.9
0.2
CENTRAL
Quebec
Ontario
527.6
233.0
294.6
529.7
228.0
301.7
29.5
11.8
17.7
32.9
12.7
20.2
W EST
Manitoba
Sas katchewan
Alberta
Britis h Colum bia
168.9
18.9
12.6
62.6
74.8
166.8
17.5
12.3
59.8
77.2
10.5
0.9
0.8
3.7
5.1
11.4
1.0
0.8
3.6
6.0
CANADA
ATLANTIC
Newfoundland
Nova Scotia
New Bruns wick
Prince Edward Is land
Truck Sales By Province*
(thous ands of units , not s eas onally adjus ted)
2013
Jan to Dec
2014
Jan to Dec
2013
Dec
2014
Dec
1,015.0
1,130.0
72.3
87.3
71.9
21.0
25.1
22.5
3.3
77.3
22.1
27.4
24.1
3.7
4.3
1.2
1.5
1.4
0.2
5.6
1.5
2.1
1.7
0.3
CENTRAL
Quebec
Ontario
548.5
186.5
362.0
628.5
197.7
430.8
38.3
11.2
27.1
48.1
13.9
34.2
W EST
Manitoba
Sas katchewan
Alberta
Britis h Colum bia
394.6
37.4
46.6
200.6
110.0
424.2
40.2
46.1
217.3
120.6
29.7
2.6
3.3
15.6
8.2
33.6
2.9
3.5
16.8
10.4
CANADA
ATLANTIC
Newfoundland
Nova Scotia
New Bruns wick
Prince Edward Is land
*Light, medium and heavy trucks.
5
March 6, 2015
Global Economics
Global Auto Report
Canadian Motor Vehicle Production*
(thous ands of units , not s eas onally adjus ted)
TOTAL
2013
Jan to Dec
2014
Jan to Dec
2014
Jan
2015
Jan
2,380.0
2,393.9
174.1
180.1
965.2
244.7
297.9
215.0
207.6
913.5
224.8
247.3
194.0
247.4
65.2
14.0
21.5
15.9
13.8
67.8
20.0
12.0
16.0
19.8
1,414.8
326.9
258.4
328.7
193.1
297.8
9.9
1,480.4
374.4
225.3
338.0
199.0
332.0
11.7
108.9
21.8
23.3
29.5
17.0
16.4
0.9
112.3
34.3
0.6
30.9
16.9
28.7
0.9
CAR
Chrys ler
GM
Honda
Toyota
TRUCKS**
Chrys ler
Ford
GM
Honda
Toyota
Others
*Production data f rom Ward’s Automotive Reports. **Light, medium and heavy trucks.
Canada — Motor Vehicle Production
3.4
Canada — World Auto Trade Balances
3.4
50
3.0
40
2.6
2.6
30
2.2
2.2
20
quarterly
3.0
Total
50
billions of dollars
40
Assembled vehicles
30
20
Total
1.8
1.8
10
10
1.4
1.4
0
0
1.0
1.0
-10
Cars
Trucks*
0.6
0.2
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
-10
Parts
0.6
-20
0.2
-30
-20
82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14
-30
Millions of units, seasonally adjusted annual rates.
*Light, medium and heavy trucks.
6
March 6, 2015
Global Economics
Global Auto Report
New & Used Car Prices
Scotiabank Car Price Indicators — Canada
year-over-year per cent change
25
25
Used*
15
15
New
5
5
CPI
-5
-5
-15
79 80
82
84
86
88
90
92
94
96
98
00
02
04
06
08
10
12
14
-15
*Scotiabank estimate from Canadian Black Book data.
20
Scotiabank Car Price Indicators — Canada
20
thousands of dollars by age of car, seasonally adjusted
18
18
16
16
14
14
1 Year
12
12
10
10
2 Year
8
6
6
4 Year
4
2
8
7980
82
84
86
88
90
92
94
4
96
98
00
02
04
06
08
10
12
14
2
Scotiabank estimate from Canadian Black Book data.
Scotiabank Car Price Indicators — United States
year-over-year per cent change
25
15
15
Used
5
-15
5
CPI
New
-5
79 80
82
84
86
88
90
92
94
96
98
25
00
-5
02
04
06
08
10
12
14
-15
Consumer price indices for new and used cars.
Shaded areas indicate recession periods.
7
March 6, 2015
Global Economics
Global Auto Report
Canadian Corporate Financial Performance
Motor Vehicle Dealers and Repair Shops
Annual
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Net Incom e
After Tax
($ m il)
773
594
571
799
942
1089
1142
1392
1649
1664
1821
1607
1644
Pre-Tax
Profit
Margin (%)
1.02
0.91
0.69
0.93
1.20
1.41
1.43
1.84
2.06
1.99
2.05
1.66
1.49
1856
796
1760
2040
1980
1.90
0.89
1.51
1.74
1.75
792
-68
1.20
0.10
Quarterly at annual rates
2013Q4
2014Q1
Q2
Q3
Q4
Average (89-14)
Low (89-14)
Def inition of Ratios:
Pre-tax Prof it Margin: pre-tax income/sales
Inventory Turnover Ratio: sales/inventory
Inventory
Turnover
Ratio
7.48
5.30
4.98
5.35
5.16
5.05
5.04
5.34
4.91
5.17
4.81
5.01
5.19
Interes t
Coverage
Ratio
3.09
2.65
2.25
2.55
2.64
3.36
3.51
4.85
5.34
5.19
5.44
5.28
4.88
Debt/
Equity
Ratio
2.04
2.91
3.17
2.74
2.75
2.56
2.44
2.07
2.11
2.02
2.05
1.84
1.89
Return on
Shareholders
Equity (%)
11.28
10.14
10.49
12.90
14.37
15.13
14.66
16.99
18.09
17.44
17.56
13.55
12.95
5.02
4.65
5.52
5.40
5.18
5.50
3.20
5.21
5.63
5.31
1.72
1.92
1.94
1.89
1.83
14.55
6.49
14.19
15.76
15.04
6.07
4.38
3.07
1.10
2.34
3.57
11.20
-1.20
Interest Coverage Ratio: (pre-tax income and interest payments)/(interest payments)
Debt/Equity Ratio: (short-term and long-term debt)/total equity
Return of Shareholders’ Equity: af ter-tax income/total equity
Retail Auto Dealer Bankruptcies
10
10
number of bankruptcies
8
8
2014
2013
6
6
2012
4
4
2
2
0
Jan.
Feb.
Mar.
Apr.
May
June
July
Aug.
Sept.
Oct.
Nov.
Dec.
0
New car dealers only; cumulative total during the year.
8