![]() Higher interest rates (and higher costs of financing), elevated production costs (and pass-through to consumer prices), and higher ownership costs through fuel price increases could erode some demand. The invasion is also likely to impact other regions through (even) higher inflationary environments. We have adjusted our European auto sales outlook from a prior mildly positive growth outlook for 2022 to a -3% y/y decline for Western Europe and very substantial losses in Eastern Europe given the size of the Russian auto sales market (we have pencilled in a -33% y/y decline for now). Negative economic shocks are likely to be concentrated in Europe initially, which would dampen regional auto demand (and supply). ( See here for details on Scotiabank Economics’ latest economic outlook including baseline assumptions.) We have revised our 2022 global auto sales outlook to about 67 mn-or essentially flat relative to 2021 sales (chart 2). Looking ahead, the Russian invasion of Ukraine imposes material downside to the outlook for global vehicle sales. ( See Box 1, Annex for more details on February auto sales.) Global sales stood at 70.4 mn saar units in February-a decent pace of sales following the 67 mn light vehicles sold in 2021-but still below pre-pandemic sales of 75 mn units in 2019 (chart 1). ![]() Consider, for example, the performance across the four largest sales markets in February: US at -6.4% m/m China at +6.7% m/m Germany at +16.8% m/m and Japan at +5.0% m/m (all sa). While the pace of prior month gains has been relatively stable, there have been wild fluctuations across markets on a month-over-month basis with supply constraints (and COVID-19 factors, to a lesser extent), masking fundamental demand. Global auto sales posted a 4.0% m/m (sa) improvement in February marking a fifth consecutive month of gains. In this issue, we explore gasoline price increases, relative affordability challenges, and possible implications for EV demand (and prices).With additional inflationary pressures on key production inputs (and the potential for further supply chain disruptions), we anticipate an elevated pricing environment will persist for new and used vehicles in the US and Canada into 2023.We maintain our auto sales outlook in these markets, but expect recent developments will reduce some of the upside potential while increasing downside risks. We expect that strong economic fundamentals, along with substantial pent-up demand, should provide an offset to rising affordability challenges in the US and Canada.The bulk of the impacts are initially concentrated in European markets, but we continue to monitor developments. We now expect flat sales for 2022 versus our earlier forecast for a 6% increase. Nevertheless, data is stale as the Russian invasion of Ukraine is likely to compound headwinds for the global auto sales (and production) recovery.Canadian auto sales data continues to differ according to source-from +6.8% m/m to -2.4% m/m-but sources converge on the selling rate at just above 1.6 mn units which is low by all accounts.Chinese sales gained ground for a fifth consecutive month (+6.7% m/m). In pretty much a reversal of January fortunes, the US saw a sales pullback (-6.4% m/m), while Germany and Japan posted advances (+16.8% m/m and +5.0% m/m, respectively). High monthly volatility across markets continues to mark the auto sales recovery.Global auto sales saw a gain of 4.0% m/m (sa) in February for a fifth consecutive month of improvements, but sales activity is still depressed at 70.4 mn saar units.
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