Auto industry poised to exceed expectations

OTTAWA — Auto sales in Canada should edge higher in 2012 although circumstances are ripe for the market to surpass expectations, according to a report from Bank of Montreal.

Driven by rising employment, continuing low interest rates, small increases in vehicle prices and better vehicle affordability, “there is the potential for a surprise on the upside,” said Kenrick Jordan, senior economist at BMO Capital Markets.

BMO forecasts auto sales in Canada will rise to 1.6 million units in 2012 from 1.59 million in 2011, and for U.S. sales to rise to 14.3 million units from 12.8 million.

“With the availabil- ity of Japanese products back to normal levels this year, we see Japanese automakers making every effort to regain market share,” Jordan said.

“This should make for attractive pricing. Furthermore, because consumers put off purchases in view of weak economic growth during the past few years, there is some pent-up demand, particularly in the U.S., where the average vehicle age is at a record high. Also, a slew of new products in the market may well entice cautious consumers to buy.”

Maryann Keller, president of automotive industry advisory Maryann Keller and Associates, said the demand for used cars has risen along with that for new cars, resulting in improved trade-in values.