The global auto manufacturing sector is slowing due to parts shortages out of Japan, but Canada’s industry will bounce back quicker than the rest of the world, according to an economist who specializes in autos.
Canada’s industry will recover by feeding strong demand for vehicles once parts plants in Japan reopen after shut downs in the wake of the devastating earthquake and tsunami.
“When you look at the global industry, the larger impact is going to be felt in Asia,” said Carlos Gomes, a senior economist at Scotia Economics, who wrote the Global Auto Report released Tuesday.
Much of Japan’s auto industry plants sit idle as water and electricity remain scarce. Toyota and Honda have said they expect shutdowns at North American plants in an effort to save parts.
Toyota has cut back on overtime at its plants in North America, including Ontario. Honda hasn’t changed its North American production so far, although it has extended its production halt in Japan through April 3.
Gomes said that although the parts shortages from Japan will affect the global supply chain, Japanese parts account for only about six per cent of all auto parts bought in Canada and the United States, so North America will be less affected.
“The reality is, if you look at the demand for vehicles, it still remains fairly strong, so once you get the shipment of parts commencing once again, then production will ramp up fairly quickly (in Canada),” Gomes said.
Strong demand in Canada means car sales in the country will likely increase slightly this year, as the markets creep back to normal, pre-recession levels, Gomes said.
His report predicts 1.59 million cars and trucks will be sold in Canada this year, compared to 1.56 million in 2010.
That is almost back to the 1.6 million sold each year between 2000 and 2007, before the recession crippled the auto industry.
“The improvement is much stronger in the emerging nations but we are expecting that Canada will see sales levels that are back to what has been normal over the past 10 years,” Gomes said.
Car and light truck sales in Canada slipped four per cent in February compared to a year earlier. That marked the first year-over-year decline since October 2009, but on a seasonally adjusted basis, sales were actually at their best levels since October.
The most vehicles were sold in Western Canada, which saw a 14 per cent month over month increase at 505,000 units sold. That’s the highest level since September 2008, as resource-rich provinces see job growth.