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Fri, Aug 01, 2008 - Page 10 News List

Sales in Brazil and China expected to drive car demand

UPS AND DOWNS Car sales in Western Europe fell 3 percent, but Eastern Europe lifted European sales to 4 percent during the first half of the year

AFP , OTTAWA

Auto sales in places like Brazil, India and China are expected to drive world demand to new records despite a sales slump in Europe and the US, a Canadian bank said on Wednesday.

Global car sales advanced a mere 1.5 percent in the first half of this year, undercut by slowing Western economies and record oil prices, Scotiabank said in its Global Auto Report.

But Brazil, Russia, India and China continue to post double-digit gains in automotive sales, it said.

BEATING THE ODDS


“Despite the year-over-year sales decline in recent months, we expect full-year 2008 volumes to climb to a seventh consecutive annual record, buoyed by ongoing strength in Brazil, Russia, China and India,” said Carlos Gomes, a Scotiabank senior economist and the report’s author.

“In fact, car sales in these nations are expected to surpass US passenger vehicle purchases in 2009,” he said.

The report said total car and truck sales volumes fell in both May and June, crippled by record oil prices averaging US$130 per barrel and weakness in the mature markets of Western Europe, Japan and the US.

In the US, sales of sport utility vehicles and pickup trucks plunged by nearly 30 percent compared to the same period last year.

PASSENGER VEHICLES


A further weakening of the US economy is also expected to slash full-year passenger vehicle sales to 14.1 million units this year and to 14.3 million units next year — “the worst back-to-back performance since 1993,” the report said.

Surging oil prices, however, had little impact in Brazil, which accounts for 60 percent of all South American sales.

Eighty-eight percent of vehicles sold in Brazil are flex-fuel models that can run on less expensive ethanol, manufactured from sugar cane. Its vehicle sales were up more than 24 percent in the first half of this year.

Vehicle sales in China moderated from an average annual increase of 30 percent this decade to a hike of 17 percent in the first half of the year, the report said.

CHINESE SUBSIDIES


China insulates domestic consumers from high oil prices by subsidizing fuel costs, but lifted fuel prices by nearly 10 percent in November and raised prices an additional 18 percent in June.

Western Europe saw a 3 percent decline in car sales because of slowing economic growth, but double-digit gains in Eastern Europe lifted total European sales to 4 percent during the first half of the year.

In Russia, which is considered separately, car sales were up 40 percent in the first half of the year to 1.45 million units.

The report said Russia was set to become the world’s fourth-largest car market next year, with annual volumes of 3.7 million units.

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