Canada Autos Report Q1 2012

We expected passenger car sales to end 2011 down by around 2% and results for November and the first 11 months combined are in line with this view. Passenger car sales rose 1.5% y-o-y in November, leaving segment sales for 11M11 down 1.8% y-o-y. On the other hand, light truck sales have rebounded, with sales up 6.7% in November and 4.7% in 11M11. We have raised our forecast for light CVs given the strength of the rebound in recent months, although, given the traditional pattern for sales to slow down in the latter months of the year, we project growth of 4% by the end of 2011 and have raised our 2012 outlook to growth of 2.5%.

One threat to growth of light truck sales in 2012 is our Commercial Banking teams view that lending to businesses in Canada will slow over the year, on the back of slowing economic growth and a drop in confidence related to the European debt crisis. If consumer lending maintains the downward trend followed for much of 2011, we also expect minimal growth in passenger car sales, although we do believe positive growth can be achieved from the low base in 2011.

We still believe production growth is sustainable through to the end of 2016 as investment projects come into play and labour agreements ensure that the Detroit Three keep an agreed proportion of North American output in Canada. General Motors Company (GM) has announced investment of CAD68mn for its assembly plant in Oshawa, Ontario, which has become one of the major beneficiaries of the carmakers North American restructuring. The plant will now add the latest Chevrolet Impala to its local range, following the decision earlier in the year to bring the new Cadillac XTS to the plant. BMI believes it is the flexible assembly line at the plant which has made it one of the lucky GM Canada plants to avoid closure and attract investment.

While Ford Motor continues to lead the market, with stable growth of 3.2% over the 11 months, the biggest gain among the Detroit Three still comes from Chrysler, which increased its sales by 13.4% y-o-y and expanded its market share from 13.1% at the end of 2010 to 14.6% for 11M11. It will look to add to this performance with the addition of the 2012 Ram Cargo Van, which entered production in late August 2011.

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