TORONTO - The wild ride at gas pumps continues and its driving an increasing number of motorist to opt for smaller, more fuel-efficient cars, according to a new study by the Bank of Nova Scotia.
The Scotia Economics report, which came out on the heels of yet another big spike in pump prices in Ontario on Tuesday, found sales of compact cars and small CUVs (crossover utility vehicles) jumped 23 per cent in Canada in April compared with a year earlier, a sharp reversal from previous months when pickups and minivans were leading the way.
In the United States, sales of such vehicles were up a whopping 40 per cent in both March and April and now account for nearly one-quarter of overall volumes, up from only 18 per cent in 2007 and less than 20 per cent in 2010, it said.
Little wonder considering gas prices approaching US$4 a U.S. gallon (3.78 litres) south of the border and near the all-time high in Canada of just over $1.42 a litre.
Prices shot up as much as six cents a litre in parts of Ontario on Tuesday in the wake of Monday's boost in crude oil prices.
But according to price-tracker GasBuddy.com, the increases were much more moderate elsewhere and even declined in many places.
In Toronto, motorists saw pump prices soar an average of more than 6.2 cents overnight to about $1.39 a litre, while in Kitchener-Waterloo the price was up more than 4.7 cents at $1.37 a litre.
On the other hand, Montreal saw pump prices drop an average of 1.65 cents to $1.37, and in Vancouver prices were down 0.4 cents a litre at $1.37.
In Edmonton, the price was up almost 0.8 cents a litre at $1.20, while in Calgary it fell 0.2 cents to $1.21.
On a province-by-province basis, GasBuddy.com found the price trend on the increase in Ontario, Saskatchewan and Newfoundland, and down in British Columbia, Quebec and the Northwest Territories. Elsewhere it was steady.
The record high for Canadian prices was set in September 2008 amid hurricane weather in the Gulf of Mexico and just a couple of months after West Texas intermediate crude spiked to a record intraday high in July of US$149.68 a barrel on the New York Mercantile Exchange.
On Monday, the price of benchmark West Texas intermediate crude oil rose 5.5 per cent to US$102.55 a barrel on the New York Mercantile Exchange, but was down 68 cents at US$101.87 in early trading Tuesday.
The auto industry has been able to cope and even prosper in the face of these increases because of improving labour markets in North America and throughout the world and higher margins, according to Scotiabank.
"Even with the shift to smaller vehicles, automaker profitability continues to improve," said Carlos Gomes, senior economist and auto industry specialist, Scotia Economics. "Earnings for the two largest North American automakers jumped to roughly US$2,400 per vehicle in their home market -- a 10 per cent increase from the 2010 average.
The improved profitability reflected rising vehicle transaction prices, in part due to lower incentives, which in the U.S. are at the lowest level in more than five years, he said.
Globally, Scotiabank found auto sales continuing to strengthen despite both the increased gasoline prices and as well as a sharp plunge in Japan following the March 11th earthquake and tsunami. However, a shortage of parts and its impact on assembly plants outside Japan is expected to hurt sales going forward.
Asia -- excluding Japan where automakers have been forced to slash production 57 per cent -- will be particularly hard hit. "We estimate that these cutbacks will reduce vehicle output in the region by 13 per cent between April and early June," the bank said.
The reductions will be largest in Thailand and Taiwan, as Japanese automakers account for more than 60 per cent of overall assemblies in these two countries. "However, even India and China will experience significant slowdowns, as Japanese manufacturers represent 40 per cent and 15 per cent of overall vehicle output respectively."
Meanwhile, the report found U.S. car and light truck sales remained above an annualized 13 million units for the third consecutive month in April.
Sales in Canada have also strengthened in recent months, averaging an annualized 1.67 million units in March and April, well above the bank's full-year 2011 forecast of 1.59 million units.
"Given the stronger-than-expected performance in Canada, we are maintaining our full-year sales forecast unchanged even as volumes are expected to weaken over the summer and early autumn, due to a shortage of vehicles from Japanese automakers," Gomes said.
