Auto sector on track for best year in a decade: report

The Globe and Mail

Newly built cars sit in a shipping lot near General Motors Car assembly plant in Oshawa, June 1, 2012. (© Mark Blinch / Reuters/REUTERS)

For Canada’s motor vehicle manufacturers, 2012 is stacking up as the most profitable year in a decade, according to the Conference Board of Canada.

The auto sector will take in about $1.35-billion in pre-tax profits this year, a bottom-line result not seen since 2002, the think tank says.

“The industry will continue to benefit from brisk growth in vehicle sales, both this year and next,” Micheal Burt, the Conference Board’s director of industrial economic trends, said in a news release Thursday.

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Canadian vehicle sales are set to surpass pre-recession levels this year, he added.

United States sales are not anticipated to get back to 2007 volumes until 2014, said Mr. Burt.

“This increasing demand is expected to lead to a prolonged recovery in Canadian auto exports.”

The Conference Board’s figures indicate that Canadian automotive production rose almost 20 per cent in the first 8 month of this year, compared to the same period last year.

Sales across Canada rose 7.1 per cent between January and August and are on track to reach 1.72 million vehicles, the highest levels since 2002, says the board.

Truck sales continue to outpace passenger car purchases, especially in the Prairies “where brisk activity in the mining and construction industries is driving sales,” says the news release.

Among the reasons cited in the study for the positive outlook on both sides of the border are record-low interest rates, a large number of revamped models and better availability of Honda and Toyota vehicles after supply-chain disruptions in 2011.

A 15 per cent improvement in Canadian motor vehicle exports is largely due to recovering sales in the U.S., says the study.

The report cautions that sales in Canada are expected to slow as demand built up during the recession fades and consumer debt levels rise.

New vehicle sales next year are expected to increase by only 1.2 per cent.

Canadian automotive production increased 19.7 per cent in the first 8 months of 2012, in large part due to a comeback in U.S. consumer and corporate demand, according to the study.

Production is forecast to increase by 8.5 per cent in 2013, then slow to a 4.1 per cent rise in 2014 as General Motors of Canada shuts one of its Oshawa plants and U.S. vehicle sales return to their pre-recession levels, says the report.

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