TORONTO, April 4, 2013 /CNW/ - The Canadian auto parts industry outperformed
in 2012, with full-year shipments surging 18% to an annualized $23.8 billion,
according to the Scotiabank Global Auto Report released today.
"One of the emerging trends in today's auto industry is that vehicles are
increasingly becoming more reliant on electronics," said Carlos Gomes,
Scotiabank's Senior Economist and Auto Industry Specialist. "We're also seeing
competitive cost challenges dictate that much of the electronics in today's
vehicles is now being imported from low-wage countries."
For more details about the Scotiabank Global Auto Report, please read the full
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ENERGIZED ELECTRONICS IMPORTS
-- Imports Displace Canadian and U.S. Shipments
Global vehicle sales moderated in February, undercut by weak volumes in
Western Europe and the impact of the Lunar New Year holidays in China which
distorted purchasing patterns. However, combined results for January and
February indicate that car sales in China have advanced 19% so far this year.
Outside of China and Western Europe, car sales continued to improve in
February, led by a 3.5% year-over-year (yr/yr) gain in North America.
Given the ongoing difficulties in Western Europe, we have downgraded our
full-year 2013 sales forecast for the region to a 5% slide from our original
estimate of a flat performance. This reflects the recurring financial,
economic and political problems which are undermining confidence and
increasing strains in the banking sector. Lending for vehicle purchases in the
Euro zone contracted in February at the sharpest pace since data collection
began in the late 1990s.
More recent data for March point to ongoing strength in the U.S. Purchases
totalled an annualized 15.3 million units last month, in line with the average
so far this year. However, looking at the sales on a daily rate basis, last
month's performance was the best since August 2007, and highlights the
broad-based strength currently evident across much of the U.S. economy.
European automakers led the way in the U.S. last month, with their volumes
advancing 7.4% yr/yr - roughly double the overall industry gain. However,
pickup trucks were the strongest segment, with volumes buoyed by a robust U.S.
housing market recovery and an improving capital spending cycle.
In contrast, purchases in Canada fell 1% below a year earlier in March and
remained below a year ago for the fourth consecutive month. Despite the
weakness, we estimate volumes totalled an annualized 1.66 million units, in
line with the average of the previous three months.
Double-digit declines at several automakers held back overall volumes in
Canada last month. However, sales improved across most of the industry and are
expected to gain momentum during the spring selling season. As a result, we
still expect full-year 2013 sales to reach our forecast of 1.69 million units
- the second highest on record.
Electronics Surge in New Vehicles Sales
The Canadian auto parts industry outperformed in 2012, with full-year
shipments surging 18% to an annualized $23.8 billion. This solid performance
outpaced an 11% gain in parts shipments south of the border last year and even
the 15% jump in Canadian vehicle production. Metal stamping - a traditional
source of strength for Canadian suppliers - led the way with sales soaring 36%
last year. However, even with this gain, the content of Canadian-made parts
in each North American-built vehicle only edged up $11 last year to $1,500,
and still remains 17% below the $1,800 average of the past decade.
Furthermore, last year's sales improvement was uneven, with weakness in
several segments, including brakes and transmissions, and particularly
electrical and electronic products.
Two important trends have emerged in the today's auto industry. The first is
that today's vehicles are increasingly more reliant on electronics. Each car
and light truck built in North America (Canada, the U.S. and Mexico) now
contains nearly US$3,200 of electronic equipment, up from just under US$1,500
a decade ago. The increase is being driven by new technology in powertrain
management, safety, comfort and entertainment, as well as navigation
systems. Historically, the replacement of mechanical systems with
electronically controlled systems, such as power steering and power windows
had been the key growth drivers in vehicle electronics.
Estimates suggest that the use of electronics in vehicles will advance in
excess of 7% per annum through the end of the decade. According to Strategy
Analytics, worldwide sales of automotive electronic equipment, including
devices that enable the delivery of information and entertainment to the
driver and occupants will drive demand from US$189 billion in 2012 to US$274
billion by 2017. Engine and powertrain management are the largest segment, but
safety, navigation and entertainment systems are growing more rapidly,
advancing at a double-digit pace. In particular, the consulting firm
highlights that collision warning systems are expected to advance by 27% per
annum through the end of the decade. In particular, camera deployment in U.S.
light vehicles could soar to roughly 90 million units by the end of the
decade, if the U.S. Department of Transportation mandates that all new cars
and trucks have backup cameras by the 2014 model year. Vehicles with keyless
entry are also expected to provide rapid growth for vehicle electronics.
Surging Imports from Low-Wage Countries
The second trend is that competitive cost challenges dictate that much of the
electronics in today's vehicles is imported. North American companies still
design semiconductor chips, censors and control devices used in automotive
electronics, however the assembly of electrical systems that route power and
signals throughout a vehicle is very labour-intensive and is increasingly
being performed in low-wage countries. As a result, despite the rising
content of electronics in new vehicles, this segment now accounts for only 4%
of overall Canadian auto parts shipments, down from 5% as recently as 2005.
In fact, imported electronic parts currently supply more than 85% of the
Canadian market. The U.S. is still the largest provider of electronic auto
parts for the Canadian market, accounting for roughly 40% of overall imports.
However, U.S. parts are increasingly being displaced by shipments from
low-cost countries. Mexico, China and the Philippines are the top three
exporters of vehicle electronics to Canada after the United Sates. Canadian
purchases from low-cost nations have nearly tripled over the past five years -
led by skyrocketing advances from Vietnam and Nicaragua - while imports from
the U.S. have been flat.
The shift in automotive electronics to low-wage regions is also evident in the
U.S. Data from the U.S. Department of Commerce indicate that imports now
account for nearly two-thirds of the U.S. automotive electronics market, more
than double the level of a decade ago. Mexico remains the largest exporter
to the U.S., with a 57% share of overall vehicle electronics imports.
However, Mexico's share peaked in 2002, and is being displaced by lower-cost
jurisdictions, such as China, the Philippines, Vietnam and the Central
American nations of Honduras and Nicaragua.
Carlos Gomes, Scotiabank Economics, (416)
866-4735,firstname.lastname@example.org; or Devinder Lamsar, Scotiabank Media
Communications, (416) 933-1171,email@example.com.
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