Global auto sales continue to improve but at a slower pace than in the first quarter amid continuing weakness in Western Europe and a recent slowdown in Brazil, according to a report issued Wednesday by Bank of Nova Scotia .
The Scotiabank global economic research report said worldwide vehicle sales grew 3 per cent year over year in April, down from a 5-per-cent growth rate in the first quarter.
In Canada, passenger vehicle sales softened to an annualized 1.65 million units last month, from a first-quarter average of 1.71 million, the report said.
Light truck purchases fell 4 per cent below a year earlier, undercut by gasoline prices in excess of $1.30 a litre for the first time since the summer of 2008, wrote Carlos Gomes, senior economist and auto industry specialist.
"In particular, household purchases of light trucks fell below a year earlier for the second consecutive month, a development last seen in the spring of 2009, when the global economy was starting to stabilize from the late-2008 downturn," Mr. Gomes said.
"As in previous months, the resource-rich provinces of Western Canada continued to outperform, with purchases advancing 3 per cent above a year earlier in April, compared with a 2-per-cent decline in the rest of Canada."
Car and light truck sales remained buoyant in the United States, averaging an annualized 14.4 million units in April — roughly in line with the 14.5-million-unit pace of the first quarter. Fleet volumes led the way, advancing nearly 10 per cent year over year.
The report said sales are being driven by rising replacement demand, improved credit availability, the drive for increased fuel efficiency, as well as improving business confidence, which has fully recovered from the falloff experienced after last year's earthquake in Japan.
"This rebound highlights that more companies believe the economic recovery is sustainable, prompting them to replace their aging vehicles," the report said.
Preliminary data for May point to a further moderation, with activity "dampened by the re-emergence of negative headlines emanating from Europe," where many euro zone economies are contracting amid a government debt and banking crisis.
Meanwhile, although the pace of economic growth has slowed in China this year, car sales are bouncing back and should strengthen further in coming months, the report said.
"In contrast, purchases of commercial vehicles, especially heavy trucks, will remain weak as China's economy continues to shift from investment-led growth toward rising household consumption."
The report noted that vehicle penetration in China is only 58 per 1,000 people, less than one-10th the level in the Group of Seven industrial countries, even as per capita incomes continue to rise rapidly.
"As a result, assembly capacity in China will expand by nearly 25 per cent this year and a further double-digit increase is projected for 2013," it said.
European auto makers are leading the expansion parade and will increase their capacity in China to 4.2 million units by 2013 — a level matching Germany's total vehicle output in the mid-1990s and more than a 30-per-cent jump from their production capabilities in China last year.
The rapid increase in European vehicle assembly capacity in China reflects the rapidly growing luxury market. Sales of German luxury brands surpassed volumes in the United States last year, and have soared by 37 per cent in 2012 — triple the increase in the United States, it said.