Auto Manufacturing Shifting to "Emerging Nations"

Scotiabank study predicts auto production in Brazil, Russia, India and China will surpass that of North America in 2008.

According to a recent study conducted by Canadian Scotiabank, automobile production in Brazil, Russia, India and China will surpass that of North America, traditionally the world's largest car market, for the first time in 2008.

The falloff in North America reflects plant closures by the traditional U.S. automakers, in addition to assembly capacity in emerging nations, which advanced by 15% per year over the past five years as automakers chose to build new plants in "key" markets that offered greater growth potential and lower-cost manufacturing.

Scotiabank senior economist Carlos Gomes said the rising car production in emerging nations "is particularly troubling for the Canadian auto parts sector, because the industry remains almost exclusively focused on the domestic and U.S. markets."

"These two markets absorb more than 95% of all Canadian auto parts shipments, but are increasingly becoming a smaller piece of the global auto industry," Gomes explained.

The study reported that close to 90% of all new capacity put in place over the past five years has been outside of the mature markets of North America, Japan and Western Europe. North American capacity meanwhile peaked at 19.6 million units in 2002, and has fallen by roughly two million units over the same period.

This year, the combined vehicle assembly capacity of Brazil, Russia, India and China will climb to 20 million units, surpassing the 17.4 million units currently in place in Canada and the United States. At the same time, global vehicle purchases continue climbing to record highs, as strength in emerging markets more than offsets weak sales in the United States.

Global car sales advanced three percent year-over-year in February, led by surges of more than 30% in Brazil and 20% in China. These two countries have sold more than 1.2 million cars in the opening months of 2008. In contrast, vehicle purchases in the United States posted a double-digit year-over-year decline in February, falling to a weaker-than-expected annual rate of 15.4 million units.

Copyright Agence France-Presse, 2008

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