TORONTO - Inventories of vehicles have declined to a "manageable" level and car production in both Canada and the United States is expected to post double-digit increases in the second quarter of 2009, says Scotia Economics auto analyst Carlos Gomes.
"The sharp cutbacks in industry output and the recent sales improvement will likely reduce U.S. dealer stocks to a more manageable 80 days' supply by the end of April, down from a peak of 125 days' in January," Gomes stated, suggesting that the crisis in the auto industry seems to be easing.
The reduction in inventory has allowed automakers to begin ramping up production, and assemblers are expected to produce an annualized 8.5 million vehicles across North American in the April to June period, up from a first-quarter average of 7.3 million units.
In his latest Global Auto Report, Gomes said the increase will be steeper in the U.S., with a 15 per cent jump in vehicle output from the year-earlier period, despite an announcement by General Motors that it will close most of its U.S. plants for nine weeks this summer.
In Canada, car production is expected to increase by a slightly smaller amount, tempered by the closure of GM's truck plant in Oshawa, Ont., next month.
Auto production is expected to add an annualized 0.8 percentage points to U.S. economic activity and 0.3 percentage points to Canadian economic activity, "the first positive contribution to economic growth from the auto sector since mid-2007."
Gomes said other positive signs seem to indicate that the worst is over in the auto industry.
"Aside from the scheduled increase in assemblies across North America, other key indicators such as rising used car prices, increased credit availability and slightly higher consumer confidence point to stronger car and light truck sales in coming months," Gomes said.
Globally, auto sales climbed to an annualized record of 9.5 million vehicles in March, while U.S. sales for the month were an annualized 9.8 million units and Canadian sales were an annualized 1.42 million units.
