Asia and Latin America should lead global car sales in 2006: Scotiabank

TORONTO (CP) - Car sales will stall in most rich countries during the coming year while ongoing double-digit percentage growth in China will lead a surge in developing countries, a Bank of Nova Scotia analysis predicts. Volumes will be weaker in North America and flat in Western Europe and Japan, but India, Mexico and Brazil will join China as high-performance markets, Scotiabank auto industry specialist Carlos Gomes said Thursday.

Overall, Gomes expects global sales growth will slow to one per cent, from an estimated two per cent in 2005.

China has been the fastest-growing vehicle market in the year just ending, with estimated growth of 18 per cent to 2.7 million units, and likely will challenge Germany as the third-largest national car market in 2006.

"Going forward, we expect China and Latin America to continue to lead the way," said Gomes.

"However, growth will moderate, especially in South America, where gains will ease to a single-digit advance after surpassing two million units for the first time since the emerging-markets crisis of the late 1990s."

In India, after a headlong 29 per cent expansion in 2004, sales growth slowed to seven per cent in 2005 as tighter emission standards took effect and fuel costs and interest rates rose. Gomes predicts seven per cent growth in the Indian market for 2006.

"Household income in India is advancing at a double-digit pace and estimates suggest that 24 million households will be able to afford a new car by 2007," said Gomes. He noted that the country of 1.1 billion people had only 7.3 million private cars at the end of 2004.

Mexico's vehicle purchases rose four per cent in 2005 "and will increase further in 2006 alongside rising credit availability, reduced interest rates and an improving manufacturing outlook," said Gomes.

He observed that Mexican industrial growth is driven by the car industry, as Ford ramps up production of mid-sized cars, DaimlerChrysler makes new pickups and Volkswagen builds a new station wagon in Mexico.

As for Canada and the United States, Gomes said vehicle purchases likely peaked in 2005, propelled by sales promotions such as last summer's employee discounts for everyone.

"Going forward, volumes will be dampened by high gasoline prices and other energy costs, now absorbing a record share of disposable income."

He expects Canadian sales of cars and light trucks to slip to 1.57 million in 2006 from 1.59 million this year.

"The slowdown will be concentrated in Central and Atlantic Canada, with Alberta sales continuing to set record highs alongside ongoing expansion in the oil and gas sector."

Gomes said U.S. sales will likely fall to 16.5 million in 2006 after hitting 17 million in 2005, the third-biggest year on record.

© The Canadian Press, 2005