Banner year forecast for Canadian auto sales
A banner year is expected for Canadian vehicle sales in 2008, while sales in the U.S. are expected to be the weakest in 10 years.(David Zalubowski/Associated Press)
Canadian auto sales should hit the second-highest level on record this year as lower vehicle prices spur sales, Scotia Economics said Wednesday.
Sales in the first four months this year are already up six per cent from last year's record pace.
"The strength reflects improved vehicle affordability, as auto makers have lowered new vehicle prices to bring them more in line with U.S. prices, as well as ongoing employment gains,” Scotiabank economist Carlos Gomes said in the bank's latest global auto report.
"As a result, we have raised our full-year 2008 forecast to 1.69 million units, the second-highest level on record, from our previous estimate of 1.61 million."
Automakers slashed car and light truck prices late last year when Canadian consumers started demanding "U.S. pricing" on vehicles after the Canadian dollar reached parity with the U.S. dollar.
Those price cuts have seen the average price of a new vehicle drop to about $25,000 now. That's down $1,000 from late last year and the lowest price since 2005, Scotiabank said.
It now takes 19.1 weeks of disposable household income to buy an average new car — the lowest since 1991. Just 10 years ago, it took 25 weeks of income to make the same purchase.
Gomes noted that vehicle sales have even been strong in Ontario, where the economy has been sputtering from weakness in manufacturing. Double-digit sales gains are being reported in Quebec and Atlantic Canada.
The rosy situation in Canada stands in sharp contrast to the bleak picture in the U.S., where high gas prices and a weak U.S. economy will likely produce the worst year for auto sales in a decade.
Scotia Economics has lowered its 2008 auto sales estimate in the U.S. to 14.7 million units — a drop of 300,000 from its earlier estimate. Sales should fall further in 2009 to 14.3 million, it said. Sales in the U.S. were 16.1 million units last year.
"We estimate that U.S. household purchasing power will be reduced by an additional $80 billion if [oil] prices continue to hover around the current $130 US per barrel," Gomes said.
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