Scotiabank boosts 2013 auto sales

Average of 1.75M passenger vehicles sold this spring

Canadian auto sales will likely come in stronger than previously thought for 2013 as automakers accelerated incentives for consumers in recent months, according to a report from Scotia Economics.

Passenger vehicles flew off Canadian lots at a blistering pace this spring, hitting an average 1.75 million units on a seasonally adjusted annualized basis in May and April, the report states.

Carlos Gomes, Scotiabank senior economist, said the strong performance this spring has led him to increase his forecast for Canadian auto sales for 2013 as a whole to 1.72 million units from 1.69 million units previously.

“After a sluggish start to the first quarter, the industry really did come out and enhanced incentives beginning in April,” he said.

“The market has obviously responded.”

Most automakers have really started to push aggressive incentives again to purchase new vehicles, including 0% financing and increasing the cash back they were offering for trade-ins, he said.

“The reality was that after the first quarter numbers went out and sales were below a year ago, I think that there was some concern that they had to act in order to stimulated the market, and they certainly did, and consumers are responding,” he said.

He said his forecast assumes that despite the recent sharp back up in bond yields since U.S. Federal Reserve chairman Ben Bernanke indicated that the U.S. central bank would likely begin to reduce liquidity later this year, automakers will maintain current incentives through the end of the year.

“We don’t believe [U.S. central bank’s decision] will have an impact on incentive levels,” Mr. Gomes said.

“The industry is prepared to keep them at current levels notwithstanding the fact that interest rates are backing up.”