TORONTO, April 25, 2012 /CNW/ - Global vehicle sales are improving and the Canadian auto parts industry is bouncing back, however, the inability of suppliers to make inroads in the fast-growing markets of Asia and Latin America is undermining Canada's position as a major automobile parts producer.

"As recently as 2007, Canada was the sixth-largest auto parts exporter in the world," said Carlos Gomes, Senior Economist and Auto Industry Specialist, Scotia Economics. "During the global economic downturn, Canada was overtaken by Spain, Korea and China, but managed to remain in the Global Top 10. However given a lack of exports to rapidly growing emerging markets, Canada was overtaken by the Czech Republic last year."

Shipments in the Canadian auto parts industry posted a double-digit year-over-year increase in the opening months of 2012, lifting volumes to an annualized pace of $20 billion - the highest level since early 2008 and prior to the global economic downturn. Employment and profitability are also rebounding, with industry payrolls advancing three per cent over the past year and by eight per cent since the bottom of the industry cycle in mid-2009. This improved performance reflects a rebound in vehicle production across North America due to strengthening demand from both business fleets and households - a trend that is expected to buoy the industry for several years.

"Despite these positive developments, the Canadian auto parts sector has been losing market share globally, with the industry still searching for a strategy geared to benefit from the rapid growth occurring outside of the mature auto markets of North America and Europe," said Mr. Gomes. "Canadian auto parts exports are still 30 per cent below the level prevailing at the top of the previous global automotive cycle in 2007 - the worst performance among the top 20 auto parts exporting nations."

Global vehicle sales continue to improve, advancing six per cent above a year earlier in March and nearly five per cent in the first quarter. This represents an acceleration from the final months of 2011 and highlights that the pace of global demand quickened in early 2012, even as purchases weakened further in Western Europe.

"The rebound continues to be driven by rising replacement demand, improved credit availability and the drive for increased fuel efficiency," added Mr. Gomes. "Small cars and fuel-efficient crossover utility vehicles accounted for 23 per cent of the overall U.S. market last month - the highest level since last spring and up from less than 20 per cent in all of 2010."

Scotiabank economists and market strategists are located in Canada, the U.S., Mexico, Peru, Chile, Thailand, Hong Kong, the United Kingdom and France. The team provides in-depth commentary regarding the factors shaping the outlook for the global economy, currencies, capital markets and commodities as well as coverage of monetary and public policy issues.