Auto production capacity in the world's four largest emerging economies is poised to surpass North American output for the first time this year, and the development is especially worrisome for Canadian auto parts producers, Bank of Nova Scotia says.
Auto makers in the so-called BRIC nations – Brazil, Russia, India and China – have the capacity to turn out a combined total of 20 million vehicles in 2008, compared with 17.4 million, combined, for their North American counterparts, Scotiabank economist and auto industry specialist Carlos Gomes said in a report Thursday.
North American capacity peaked at 19.6 million units in 2002 and the decline since then has reflected plant closings by domestic manufacturers, Mr. Gomes said. The approximately 2 million unit decline has come despite capacity expansion in North America by Japanese, Korean and European car makers, he added.
By contrast, capacity in emerging markets has been leaping ahead by 15 per cent annually in the past five years as auto makers, including North America's Big Three, have been building new plants in markets that offer greater growth potential and lower costs.
A welder works at the Auto Parts Alliance factory in Guangdong, China. (Getty Images)
In fact, nearly 90 per cent of all new vehicle production capacity added since 2003 has been outside of the mature auto markets of North America, Japan and Western Europe.
“We estimate that vehicle assembly capacity in emerging nations now totals more than 30 million units, roughly 36 per cent of the global total and more than double the installed capacity in Canada and the United States,” Mr. Gomes said.
“Rising vehicle production in emerging nations is particularly troubling for the Canadian auto parts sector, because the industry remains almost exclusively focused on the domestic and U.S. markets. These two markets absorb more than 95 per cent of all Canadian auto parts shipments, but are increasingly becoming a smaller piece of the global auto industry.”
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