New technologies drive rising automotive electronics imports: Scotiabank

Canada on track for vehicle sales of 1.66 million vehicles for 2013.

Working on the 2013 Toyota RAV4. Photo: Toyota

TORONTO — The Canadian auto parts industry had a good 2012, with full-year shipments surging 18% to an annualized $23.8 billion, according to the latest Scotiabank Global Auto Report.

This solid performance outpaced an 11% gain in parts shipments in the US last year and even the 15% jump in Canadian vehicle production.

The report notes metal stamping – a traditional source of strength for Canadian suppliers –saw sales soar 36%, although the content of Canadian-made parts in each North American-built vehicle only edged up $11 last year to $1,500, and still remains 17% below the $1,800 average of the past decade.

Furthermore, Scotiabank says last year’s sales improvement was uneven, with weakness in several segments, including brakes and transmissions, and particularly electrical and electronic products.

The report cites vehicles’ reliance on electronics as an important new trend in the industry.

“We’re also seeing competitive cost challenges dictate that much of the electronics in today’s vehicles is now being imported from low-wage countries,” said Carlos Gomes, Scotiabank’s senior economist and auto industry specialist.

Each car and light truck built in North America now contains nearly US$3,200 of electronic equipment, up from just under $1,500 a decade ago. This increase is driven by new technology in powertrain management, safety, comfort and entertainment, and navigation systems.

Estimates suggest that the use of electronics in vehicles will advance by more than 7% annually through the end of the decade.

According to Strategy Analytics, global sales of automotive electronics will drive demand from $189 billion in 2012 to $274 billion by 2017.

The consulting firm says engine and powertrain management are the largest segment, but safety, navigation and entertainment systems are growing more rapidly, advancing at a double-digit pace. Collision warning systems are expected to advance by 27% annually through the end of the decade. In particular, camera deployment in US light vehicles could soar to roughly 90 million units by the end of the decade, if the US Department of Transportation mandates that all new cars and trucks have backup cameras by the 2014 model year.

Vehicles with keyless entry are also expected to provide rapid growth for vehicle electronics.

North American sales continued to improve in February with a 3.5% year-over-year gain and ongoing strength in the US for March. Purchases totalled an annualized 15.3 million units, in line with the average so far this year. However, looking at the sales on a daily rate basis, March’s performance was the best since August 2007, and highlights the broad-based strength currently evident across much of the US economy.

European automakers’ volumes advancing 7.4% year-over-year – roughly double the overall industry gain. However, pickup trucks were the strongest segment, with volumes buoyed by a robust US housing market recovery and an improving capital spending cycle.

However, Scotiabank reports purchases in Canada fell 1% below a year earlier in March and remained below a year ago for the fourth consecutive month.

“Despite the weakness, we estimate volumes totalled an annualized 1.66 million units, in line with the average of the previous three months,” said Gomes.

Double-digit declines at several automakers held back overall volumes in Canada. However, sales improved across most of the industry and are expected to gain momentum during the spring selling season. As a result, Scotiabank is still counting on 2013 sales to reach 1.69 million units – the second highest on record.