Canadian auto sales slowed by -4.9% m/m (sa) in January, starting the year at 1.69 mn (saar) units according to Wards Automotive (chart 1). January’s seasonally adjusted pace of annualized new light vehicle sales is coming on the heels of November and December’s average 1.78 mn (saar), the two fastest seasonally adjusted months since the first half of 2021 when supply-side constraints were becoming most acute. New auto sales for the first month of the year are in line with the 1.68 mn units through 2023 and up 2.1% y/y (nsa) from the same month a year prior. Canada’s labour market continues to support consumers, having added more than 400k jobs in 2023 along with average hourly wage gains for permanent employees averaging 5% y/y. However, these strong wage gains combined with declining productivity, or output per hour worked, risks adding to the persistence of inflation. Core measures of price increases averaged more than 3% y/y in Q4-2023, continuing to run above the Bank of Canada’s 2% target. In the latest forecasts from Scotiabank Economics, we expect the Bank of Canada to hold its policy rate at 5% through the first half of 2024, with rate cuts beginning later in Q3 ending 2024 at 4.25% and falling to 3% by end of 2025. The elevated interest rate environment is likely to continue weighing on consumer demand, which will allow inventory levels to continue building up from their still low levels. Our outlook for Canadian new light vehicle sales expects a further increase to 1.71 mn in 2024 as pent up demand is unwound despite elevated interest rates. The recovery is expected to gain steam with 1.77 mn sales estimated in 2025 as inventories improve and rates pressures ease.

Chart 1: Canada Light Vehicle Sales


US light vehicle sales fell -6.9% m/m (sa) to 15.0 mn (saar) units in January, the slowest monthly pace since early spring last year (chart 2). Upward revisions of more than 1% to non-seasonally adjusted light vehicle sales for November and December respectively imply that Q4-2023 sales increased 0.2% q/q as opposed to the previously reported second consecutive quarterly decline. Elevated interest rates continue to pose headwinds to demand, as the US 48-month new car loan rate holds near 7.7%, up nearly 4 percentage points from March 2022 when the Federal Reserve began to hike their policy rate. Resilient growth in US economic activity poses upside risks to inflation, as we expect the Fed to hold the Fed Funds upper bound at 5.50% with rate cuts beginning in Q3, ending the year at 4.50% and end 2025 at 3%. This prolonged period of higher interest rates will weigh on consumer growth, bringing supply and demand closer to balance. The pace of North American light vehicle production continued to decline through the second half of 2023 down to 14.1 mn (saar) units in December, slightly below the annual volume for 2022. While US light vehicle inventory levels have increased in 19 of the past 22 months, easing supply-side constraints, the pace at which inventories are building slowed in Q4 when adjusting for seasonality, as both the auto inventory-to-sales ratio and days’ supply measures are half of their 2010s average. Our outlook for US new light vehicle sales forecasts an increase to 15.9 mn in 2024, and 16.8 mn in 2025.

Chart 2: US Light Vehicle Sales


Global auto sales slowed by -0.8% m/m (sa) in December, rounding out Q4 which held relatively flat (-0.2% q/q, sa) to wrap up the year (chart 3). Annual global sales increased to 75.3 mn in 2023, up 11.9% y/y from the year prior, albeit with varied contributions at the regional level owing to unique factors.

Chart 3: Global Vehicle Sales by Region

Auto sales across Canada, US, and Mexico increased 13.3% y/y to 18.5 mn, with double digit percentage growth across all three countries, notably with sales in Mexico increasing 25% y/y to 1.36 mn, surpassing annual 2019 volume by 3%. See a more detailed coverage of Mexican auto sector here. The regional percentage growth in auto sales was aided by a further 9% recovery in North American light vehicle production. Nevertheless, annual auto sales for North America remain 8% below 2019 volumes, as the countries’ respective central banks maintain elevated policy rates to slow inflation back towards their targets, posing headwinds to demand.

In western Europe, auto sales increased 13.7% y/y to 11.4 mn, with aided by growth in thirteen of the fifteen countries covered, and increases in the major markets of France (16.1% y/y), Germany (7.3%), Italy (18.9%), Spain (16.7%), and the UK (17.9%). Ireland is the only country covered in which 2023 auto sales surpassed 2019 levels (4.0%) — most other countries covered remain 15% to 25% below pre-pandemic levels. Growth in economic activity across western Europe through the past two years has slowed as households contended with higher energy prices in addition to rising interest rates as the European Central Bank and Bank of England have tightened monetary policy stances to slow inflation. Auto sales in eastern Europe increased 48.8% y/y to 2.76 mn units as sales in Russia surpassed 1 mn units for the first time since 2021 following the 650 k sales in 2022 when many countries around the world imposed sanctions on Russia for their invasion of Ukraine.

Asia Pacific auto sales increased more than 9% for a second consecutive year to 39.4 mn in 2023, up 16.4% relative to 2019 levels, though with variation at the country level. Auto sales in China, which accounts for two-thirds of the regions’ market by sales, increased 10.5% y/y to 26.0 mn. Meanwhile, Australia and Japan auto sales increased 12.7% and 13.8% from the previous year and are 3% above and 8% below 2019 volumes respectively.

South American auto sales growth was much more modest, increasing 2.2% y/y to 3.25 mn units. Increases from Argentina (8.2% y/y), Brazil (11.2%), and Peru (2.9%) were weighed down by declines in Chile (-26.5%) and Colombia (-28.5%). Growth in economic activity in the region has slowed from restrictive policy rates along with the impacts of El Niño weather. However, with inflation coming down towards target in Brazil, Chile, Colombia, and Peru, the respective central banks began to cut their policy rates last year with further easing expected through 2024.

Our outlook for global auto sales is that the pace of growth will slow to 2.3% in 2024 and 3.5% in 2025 as elevated interest rates weigh on consumer spending and activity (chart 4). 

Chart 4: Regional Contributions to Growth in Global Auto Sales
Table 1—Global Auto Sales Outlook (mns units); Table 2—Provincial Auto Sales Outlook (thousands of units ann.); Table 3—North American Annual Production Outlook
Quarterly Outlook for North American Auto Sector Chart 1: Canadian Light Vehicle Sales, Chart 2: US Light Vehicle Sales, Chart 3: Wards North American Auto Production Outlook; Table 3—North American Annual Production Outlook