Canadian Manufacturing

Auto industry thriving around the globe, Scotiabank report suggests

Loss per vehicle in western Europe has dropped to roughly $200, about half the recorded loss last year



TORONTO—Global auto sales picked up the pace again in October, as a 33 per cent surge in China drove overall volumes nine per cent above 2012 levels, according to a Scotiabank report.

In Canada, sales in November rose again, setting a fifth consecutive monthly record, according to Scotiabank’s Global Auto Report, but it was the gains elsewhere that helped industry profits surge.

Massive year-over-year gains in the United States and Asia helped push profitability higher than pre-recession levels.

In fact, earnings per vehicle has jumped to $2,200 in North America, the industry’s most profitable region, and is picking up steam elsewhere.

According to the report, despite average vehicle pricing in Asia—excluding Japan—coming in at 40 per cent of that in North America, the earnings per vehicle in the region is now nearing $1,000 per vehicle.

Even in western Europe, the only jurisdiction that remains unprofitable thanks in large part to the long-standing recessionary conditions, loss per vehicle has been slashed by nearly 50 per cent and now sits at roughly $200.

All that has helped push profitability for the five largest automakers up to more than US$50-billion.

“Profitability for the five largest auto manufacturers remains healthy, with gross margins (consistently) at 10-year highs … since 2011,” Carlos Gomes, Scotiabank’s auto industry specialist, said in the report’s release.

What has been a big boost to the industry in recent years is capital investment, which Scotiabank said hit $60-billion last year.

The firm said data from the University of Windsor indicates China received roughly 60 per cent of that investment.

Investment plans are highest at Volkswagen, where the German automaker announced late last month plans to invest $120-billion between now and 2018 in modernizing its lineup and facilities in a bid to become the top-selling firm.

According to Scotiabank, investment by the global auto sector now exceeds five per cent of overall sales, the highest level since 2005 and a big improvement from only 3.6 per cent in 2010.

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