Scotia Economics report sees double-digit increase in global vehicle production in first half of 2011; China to surpass European vehicle output this year
Rising global vehicle sales and profitability have encouraged automakers to continue to increase vehicle production, providing the global economy with some positive offset to the dampening impact of the recent surge in energy prices, according to the latest Global Auto Report released on Friday by Canada-based Scotia Economics.
During the latest financial reporting season, virtually every automaker increased their full-year 2011 global sales forecast and boosted their production schedule for the opening months of 2011. We estimate this will lead to a further double-digit year-over-year increase in vehicle production in most countries during the first half of the year.—Carlos Gomes, Senior Economist, Scotia Economics
According to the report, China—the world’s leading vehicle-producing nation—will lead the increase in vehicle output, with full-year assemblies expected to jump 17% to more than 21 million units. Vehicle output in China will surpass European assemblies—the traditional vehicle production leader—in 2011 and account for about 28% of overall global vehicle output. This is more than double its 13% share as recently as 2008, and a sevenfold jump from only a 4% share a decade ago.
Surging car sales in China are also lifting vehicle production in Western Europe, especially Germany. In January, global sales for Germany’s three major automakers jumped 21 percent above a year earlier, led by a 31 percent year-over-year surge in China. This sharp increase prompted manufacturers to significantly add to their first-half vehicle production schedules. We estimate that over the past month, European automakers have boosted their first-quarter output plans by more than six percent and their second-quarter schedules by two percent.—Carlos Gomes
Rising output schedules will also enable assemblies in Germany to surpass their pre-recession peak in 2011—a first among developed nations. Vehicle production in Germany will likely climb to 6.3 million units in 2011, overtaking the previous record of 6.2 million set in 2007. This reflects the rising popularity of luxury models across the globe, but especially in China, as well the as heavy export-orientation of Germany’s automotive sector—roughly 75 per cent of all vehicles produced in Germany are exported.
In the report, Gomes noted that the auto industry will also add to economic growth in Latin America. Sales continue to advance in Brazil, Argentina, Chile and Peru, leading automakers to plan for an additional 13% increase in vehicle production over the coming year. While this is a moderation from a 15% jump in 2010, the industry will continue to support economic growth.
The NAFTA region—Canada, the United States and Mexico—is also expected to post a solid increase in vehicle assemblies this year. In the United States, the latest US industrial production report confirmed that motor vehicle output jumped 3.2% month-to-month in January—the largest increase among all industrial sectors—and 15% above a year earlier. Further gains lie ahead as automakers have planned a 20% year-over-year jump in first-quarter assemblies to better align output with strengthening demand.
Canada is scheduled to post the largest increase in vehicle output across North America in early 2011, as production ramps up following the late-2010 retooling at a major car plant in Brampton, Ontario. The first-quarter jump in Canadian assemblies will be the largest since mid-2009, when the global economic recovery was in its infancy.