Car purchases remain in the fast lane in China and Latin America, boosting 2006 global volumes to a new record high, according to the latest Global Auto Report released today by Scotia Economics.

Double-digit gains in the emerging nations of Asia and the Americas stands in sharp contrast to declining volumes in mature markets, especially the U.S. and Japan, where record oil prices are undercutting consumer purchases.

Car purchases in China soared by almost 50% in the first half of 2006, accelerating from a 22% jump for the same period in 2005. “With household income in China continuing to advance at a double-digit pace and automakers aggressively launching new models, we expect full-year sales to total 3.8 million units in 2006, up from 3.1 million last year,” said Carlos Gomes, Scotiabank’s auto industry specialist. “By the end of the decade, car sales in China will likely surpass five million units, overtaking Japan as the second-largest car market.”

Compact cars are posting the strongest gain in China, partly due to a recent reduction in excise taxes, designed to promote sales of fuel-efficient models. Volumes at General Motors, which offers several compact models, have climbed by 47% so far this year, outpacing the gain by Volkswagen, and enabling the North American automaker to remain the market leader in China. GM overtook Volkswagen, the traditional leader in China, last year. China already accounts for more than 70% of GM’s volumes in Asia and more than 10% of its global sales.

India’s car market has also revved up in recent months, with growth accelerating since March alongside an 8% reduction in excise duties to 16% from 24% on small cars. During the first half of 2006, purchases climbed by 18%, a marked improvement after a 6% increase in 2005.

Demographics and solid economic growth are also boosting vehicle sales in Latin America. The region has a population of more than 500 million people, with a rapidly growing labour force and low vehicle ownership.

“We estimate that Latin America’s labour force is growing by almost 2% per annum, second only to India,” said Gomes. “Only 11% of the population owns a vehicle, a level well below the ownership rate for developing nations and less than one-sixth the 73% penetration rate in the G7 countries. Rising incomes are propelling Latin America into a key growth market.

“In fact, South America and Asia are currently the only regions experiencing double-digit gains in vehicle sales,” said Gomes. “While Asia, including Japan, led the way in the first half, with purchases soaring 14% year-over-year, South America is not far behind with volumes climbing by 10%.”

Brazil is the largest auto market in South America and is already one of the 10 largest in the world, with purchases totalling 1.62 million units in 2005. New vehicle sales in Brazil have advanced by an additional 8% year-over-year in 2006, boosted by purchases of flex-fuel cars, which can run on either gasoline or ethanol.

“Despite being one of the world’s largest vehicle markets, less than 12% of Brazil’s 186 million people own a vehicle. While this is slightly higher than the average for Latin America, it is well below the level for other countries with similar per capita income,” said Gomes. “For example, in Malaysia, a nation with per capita income of US$5,000, a level similar to Brazil’s, nearly one-third of the population owns a vehicle.”

Asia, Latin America and Mexico auto sectors offer explosive growth potential

Sales in U.S., Japan lagging due to record-high oil prices

Car purchases remain in the fast lane in China and Latin America, boosting 2006 global volumes to a new record high, according to the latest Global Auto Report released today by Scotia Economics.

Double-digit gains in the emerging nations of Asia and the Americas stands in sharp contrast to declining volumes in mature markets, especially the U.S. and Japan, where record oil prices are undercutting consumer purchases.

Car purchases in China soared by almost 50% in the first half of 2006, accelerating from a 22% jump for the same period in 2005. “With household income in China continuing to advance at a double-digit pace and automakers aggressively launching new models, we expect full-year sales to total 3.8 million units in 2006, up from 3.1 million last year,” said Carlos Gomes, Scotiabank’s auto industry specialist. “By the end of the decade, car sales in China will likely surpass five million units, overtaking Japan as the second-largest car market.”

@page_break@Compact cars are posting the strongest gain in China, partly due to a recent reduction in excise taxes, designed to promote sales of fuel-efficient models. Volumes at General Motors, which offers several compact models, have climbed by 47% so far this year, outpacing the gain by Volkswagen, and enabling the North American automaker to remain the market leader in China. GM overtook Volkswagen, the traditional leader in China, last year. China already accounts for more than 70% of GM’s volumes in Asia and more than 10% of its global sales.

India’s car market has also revved up in recent months, with growth accelerating since March alongside an 8% reduction in excise duties to 16% from 24% on small cars. During the first half of 2006, purchases climbed by 18%, a marked improvement after a 6% increase in 2005.

Demographics and solid economic growth are also boosting vehicle sales in Latin America. The region has a population of more than 500 million people, with a rapidly growing labour force and low vehicle ownership.

“We estimate that Latin America’s labour force is growing by almost 2% per annum, second only to India,” said Gomes. “Only 11% of the population owns a vehicle, a level well below the ownership rate for developing nations and less than one-sixth the 73% penetration rate in the G7 countries. Rising incomes are propelling Latin America into a key growth market.

“In fact, South America and Asia are currently the only regions experiencing double-digit gains in vehicle sales,” said Gomes. “While Asia, including Japan, led the way in the first half, with purchases soaring 14% year-over-year, South America is not far behind with volumes climbing by 10%.”

Brazil is the largest auto market in South America and is already one of the 10 largest in the world, with purchases totalling 1.62 million units in 2005. New vehicle sales in Brazil have advanced by an additional 8% year-over-year in 2006, boosted by purchases of flex-fuel cars, which can run on either gasoline or ethanol.

“Despite being one of the world’s largest vehicle markets, less than 12% of Brazil’s 186 million people own a vehicle. While this is slightly higher than the average for Latin America, it is well below the level for other countries with similar per capita income,” said Gomes. “For example, in Malaysia, a nation with per capita income of US$5,000, a level similar to Brazil’s, almost one-third of the population owns a vehicle.”