Canada’s auto parts sector is losing global market share because it has not found a way to tap into the rapid growth in low-cost locations, Bank of Nova Scotia economist Carlos Gomes said in a report on Wednesday.

“The inability to make inroads in the fast-growing markets of Asia and Latin America is undermining Canada’s position as a major auto parts producer,” Mr. Gomes said.

Until 2007, Canada was the world’s sixth-largest auto parts exporter, but was overtaken by Spain, Korea and China during the economic downturn, the report said. Last year, Canada lost its top 10 exporter spot to the Czech Republic.

The United States takes 57 per cent of all parts shipped from Canadian plants, but the U.S. share of global vehicle assemblies has slipped to 10 per cent from about 25 per cent in the mid-1990s, the report said.

Another 39 per cent of Canadian parts remain in Canada to supply local vehicle assembly plants, the report said. Canada and the U.S. now represent about 13 per cent of global vehicle production, down from 30 per cent in the late 1990s.

Canadian auto parts shipments, employment and profitability are bouncing back on stronger vehicle production across North America, a trend expected to buoy volumes for several years, Mr. Gomes noted.

However, the sector still does not have a strategy to benefit from rapid growth outside mature auto markets in North America and Europe, the report said.

In the opening months of 2012, Canadian auto parts shipments posted a double-digit gain, lifting volumes to an annualized pace of $20-billion, the highest level since 2008 before the global economic downturn, Mr. Gomes said.

Canadian exports outside the U.S. declined to 4 per cent of output last year from 5.4 per cent in 2007. Only 1 per cent of Canadian-made parts are shipped to high-growth emerging markets of Asia and Latin America.

“We estimate that each vehicle produced outside of North America and Europe contains less than $40 of auto parts supplied by Canadian producers, either from their North America operations or from Canadian-owned plans operating in these countries,” Mr. Gomes said.

AutoNation and other auto retailers have been helped by a clear acceleration in the pace of auto sales this year. In the first quarter, auto makers sold 3.5 million cars and light trucks in the U.S., up 13% from the year-ago period.

“The renaissance in auto retail is well under way,” Chairman and Chief Executive Michael J. Jackson said in a statement. “The American consumer has more choices than ever with improved fuel efficiency, better technology, and accelerated product offerings.”

AutoNation’s sales of new cars and trucks increased 10.4% to 61,516 vehicles. The company’s sales of cars made by the three Detroit auto makers—General Motors Co., Ford Motor Co. and Chrysler Group LLC—rose 15.7%. Sales of Japanese-brand cars and trucks increased 6.2%, and sales of luxury vehicles jumped 14%, AutoNation said.

At the same time, AutoNation reduced its sales, general and administrative expenses to $432.9 million, down 6.2% compared to a year ago.

In the first quarter, AutoNation repurchased 11.7 million of its own shares, the equivalent of 9% of the shares outstanding as of Dec. 31, 2011. The aggregate purchase price for the shares was $405.4 million.

According to analysts, the positive sentiment towards auto stocks is on expectations that a strong momentum in volume growth would continue due to the easing of interest rates.

The Reserve Bank of India (RBI) surprised the market with a 50-basis-point cut in its key policy rate on Tuesday. A few lenders have already started lowering lending rates.

Said Yaresh Kothari, auto analyst at Angel Broking, “Auto stocks are gaining on expectations of good sales growth in 2012-13, led by an easing in the interest rate-tightening cycle. Volume growth is likely to get a boost from consumers who had been postponing their purchases due to the high interest rates.”

“Double-digit volume growth is expected to continue this year as well,” said Deven Choksey, managing director at KR Securities.

“Going by the strong volume growth posted by companies in the previous three months, most auto companies will post good numbers for the March quarter,” he added.

The Society of Indian Automobile Manufacturers expects growth in passenger car sales to be between 10 per cent and 12 per cent this financial year.

Extending record sales in January and February, most auto companies had posted highest-ever monthly sales in March.

Since the beginning of this year, investors have turned bullish on the sector on robust sales performance. The BSE Auto Index has gained 32 per cent so far in 2012, outperforming the Sensex, which has gained a little over 13 per cent.

Tata Motors, the country’s largest commercial vehicle maker, has been the biggest contributor to the gains on the index. The stock, which constitutes almost a third of the index weightage, has gained 80 per cent since January 2012. Shares of Tata Motors closed at a record level of Rs 319.35 on Thursday, up 3.15 per cent. The company has benefited from the strong sales growth of Jaguar and Land Rover.

Parts makers and auto makers are collaborating on quick steps to deal with short supplies of the resin, following an explosion last month at a German chemical plant which cut worldwide output of nylon-12 in half.

Producers of vehicle parts that contain nylon-12 have already compiled a list of ways to substitute other materials now on the market in order to keep making fuel and brake lines, according to people familiar with the matter.

Earlier this month, a Michigan auto parts supplier, TI Automotive Ltd., warned of a high risk that the shortage of nylon-12 would force shutdowns at auto assembly plants within several weeks.

At the same time, auto makers are talking to other chemical manufacturers, including DuPont Co., DD -0.24% BASF Corp., and Dow Chemical Co., DOW -0.03% about replacing nylon-12 with more readily available resins in the future, those people said.

DuPont has assembled a team to work with auto makers on increasing production of replacement materials. However, it will be up to the auto makers to determine on a case-by-case basis which materials they will use.

“This will not be a one-size fits all,” DuPont spokeswoman Carole Davies said. “We are working closely with our customers to find the alternative materials that will work in specific applications.”

Dow Chemical said it does not make or manufacture nylon-12 but it has allocated “essential resources” to find alternatives that could replace the resin. One example of a replacement is nylon 6-6, a synthetic used in carpet fibers, zip ties and hoses.

A spokeswoman for Evonik Industries AG, the German company that is the main producer of nylon-12, said on Wednesday that it is in talks with some customers to determine if a biologically-based polymer that Evonik now produces might work as a replacement for some applications of nylon-12.

On Tuesday, executives from eight auto makers including General Motors Co. GM +0.46% and Toyota Motor Co. TM +0.14% and 50 parts suppliers met in a Detroit suburb to craft a plan to deal with the potential shortage. It is one of the few times the auto industry has collaborated on a common problem. During the meeting, six committees were formed to develop, evaluate and fast track action plans to mitigate the nylon-12 shortfall. The committees are studying component and vehicle production.

Follow-up meetings have been scheduled over the next few weeks with the findings to be shared throughout the industry. TI Automotive, a maker of fluid carrying systems and other components based in Auburn Hills, Mich., was the first to notify the industry of a possible shortage earlier this month.

The nylon-12 supply crisis began last month after an explosion at an Evonik plant in Marl, Germany, that essentially cut the global output of nylon-12 in half. Nylon-12 is extensively used throughout the auto industry in the production of fuel lines, fuel tanks and brake lines since it is highly resistant to reacting with brake fluid and gasoline.

Evonik officials have said it may take more than six months before production can resume. Industry experts estimate there is less than two-month of nylon-12 supply available and any substitutes must still be tested.

“There is going to be a period of touch and go when it comes to automotive production disruptions,” IHS Automotive analyst Michael Robinet said on Wednesday.

The automaker will entrust the overseas model’s development process, which spans everything from product planning, through engineering design and then to testing and evaluation, to local leams, the business daily said.

To localize development, Toyota will ramp up its U.S. engineering workforce by more than 20 percent and will launch a locally developed Avalon model there this year, the daily said.

Larger vehicles sold well, too, offering more evidence of growing confidence in the economic recovery. Small businesses, farmers and others took advantage of big promotions to buy pickups.

In all, Americans bought 1.4 million cars and trucks in March, up 13 percent from the same month a year ago. Edmunds.com said it was the most vehicles sold since August 2007.

General Motors, Chrysler and Toyota all reported double-digit gains over last March. Nissan and Hyundai set company records. Only Honda reported a decline.

If car sales stay at the same rate as March, they would end the year at 14.4 million, up from 12.8 million in 2011. While that’s still below the 17 million of the booming mid-2000s, it’s far higher than the industry’s downturn in 2009, when 10.6 million vehicles were sold.

Jesse Toprak, vice president of industry analysis at car buying site TrueCar.com, expects continued strong sales this year, thanks to compelling new products, improvements in consumer confidence and the stock market, and low interest rates.

“The good news is that the recovery has legs,” he said. He expects total sales of 14.5 million in 2012.

NASCAR

Sprint Cup Series

Goody’s Fast Relief 500 – Martinsville Speedway – Martinsville, VA

Jeff Gordon is having perhaps his worst start to a season in his illustrious 20-year career, but the four-time Sprint Cup Series champion is hoping that will change this weekend at Martinsville Speedway.

With five races completed so far this season, Gordon sits 25th in the point standings. He finished 40th in the Daytona 500 after suffering engine failure midway through the race. He rebounded somewhat with an eighth-place run the following week at Phoenix. But the 40-year-old driver has finished no better than 12th in the last three races.

Earlier this month at Bristol, Gordon crashed late in the race when he cut a tire after making contact with his Hendrick Motorsports teammate Dale Earnhardt Jr. He ended up finishing 35th.

Gordon had a good run going through the first half of last Sunday’s race at California, but on lap 107, Gordon was hit with a stop-and-go penalty on pit road for leaving his stall with the gas can still attached to his No. 24 car. He finished 26th after the race was called 71 laps short of its scheduled distance due to rain.

“We’ve had some good performances this year hurt by engine issues or accidents or pit road miscues,” Gordon said. “But we’ve had fast race cars, and that is always encouraging. We just need to have a complete race. And then another one, and then another one. We have a team capable of stringing together a lot of good finishes.”

Martinsville is indeed a racetrack where Gordon can turn his season around. He leads all active drivers with seven wins at the flat 0.526-mile track. Gordon has also posted 17 top-10 finishes in the last 18 races there. He placed 20th in the fall 2010 event.

“The one place on the schedule that has changed the least is Martinsville,” he said. “I believe the track, the setups and the tires have changed the least here compared to other tracks over the course of 20 seasons. And that’s where experience can really pay off.”

When the series competed at Martinsville one year ago, Earnhardt Jr. was just a handful of laps away from finally ending his lengthy winless streak in the series. Earnhardt Jr., who started 26th, took the lead for the first time when he nudged Kyle Busch out of the way with 21 laps remaining. Busch had led 151 laps up to that point.

Most in the estimated crowd of 60,000 were jumping for joy when Earnhardt Jr. made it to the front, but Kevin Harvick crashed the party when he passed Earnhardt Jr. for the lead with four lap remaining. Harvick went on to win a Sprint Cup race at Martinsville for the first time.

“We’ve been fast at Martinsville a lot and to be able to put together a complete day like we did last [spring], at the end of the race, we were able to capitalize on a fast car and win the race. We had a lot of things to overcome on that particular day and were able to pull out a win.”

“It’s been a long time,” he said, following word Wednesday that the third shift will likely recall at least 100 workers currently on layoff. “It’ll be nice to go back to work.”

“It hasn’t been easy for the past three-and-a half years,” said the married father of three. “But you know what? You do what you have to to make it work.”

Manufacturers across Ontario are ramping up production and returning some much-needed jobs to the sector in response to a surge in auto sales.

Toyota Motor Manufacturing Canada Inc. also announced a major boost in production on Wednesday.

Toyota will be increasing production of its RAV4 compact crossover at its assembly plant in Woodstock, Ont., adding about 400 jobs in early 2013.

Brian Krinock, TMMC president, said the $80-million investment in the plant was part of the company’s so-called Project Green Light announced in June 2011. The federal and provincial governments committed nearly $71 million each to Toyota to increase productivity and support the production of greener, more fuel-efficient vehicles.

Toyota is building its first all-electric vehicle in North America, the RAV4 EV, at the Woodstock plant under the initiative. Krinock said the RAV4 production ramp-up to 200,000 units annually from 150,000 is the second of seven projects in Project Green Light.

“It’s increasing capacity with existing lines,” Krinock said. “There are bottlenecks and constraints, and the majority of the investment is going towards equipment modification.”

He would not elaborate on other Green Light projects, but said the goal is to have them implemented over the next two years.

The production growth is also the result of Toyota’s increased confidence in the recovery in the auto sector, Krinock said.

“We are very optimistic about the recovery, and where we see the North American market going,” he said.

March auto sales figures, due out next week, follow a dramatic rise in Canadian auto sales in January and February — up more than 13 per cent year-over-year.

In the U.S., auto sales rose 14 per cent in the first two months of the year, according to Scotia Economics.

Ford builds engines for its F-Series pickup trucks and Mustang cars at the Essex plant. Adding the third shift is expected to boost output by 40 per cent, said spokeswoman Lauren More. The plant currently employs about 640 workers who assemble about 970 engines a day on two shifts.

More said U.S. sales for the F-Series are up 17 per cent overall this year, and in Canada, they are up by about 25 per cent.

At the end of 2011, nearly 55,000 people were employed in motor vehicle manufacturing in Canada — more than the 51,000 employed at the lowest point for the sector in 2010, but down dramatically from the nearly 73,000 who worked in the sector at the end of 2007 prior to the collapse of the industry, Statistics Canada figures show.

Once the third shift is up and running, CAW Local 200, which represents workers at the Essex plant, will have just under 700 members on layoff, said local president Chris Taylor.

“It’s amazing I’m sitting here telling you it feels great for it to be below 700. In October we were at 1,100.”

The month is traditionally strong as consumers cash in their tax refunds and use the money for car purchases, Kelley said.  Its analysts are noticing an especially high demand for fuel-efficient models because of the recent run-up in gas prices.

Market research company J.D. Power & Associates is forecasting similar sales numbers.

“Each month of strong sales brings with it increased optimism that the pace of growth represents a true recovery for the sector,” said John Humphrey, a J.D. Power senior vice president. “Barring any future shock related to geopolitical issues in the Gulf region and further upward pressure on the price of oil, we believe sales will continue on a solid pace for the balance of the year.”

After nearly collapsing in 2008 and 2009, the industry has become one of the strongest performing segments of the U.S. economy.

People replacing older vehicles, easing credit conditions, an improving jobs outlook and growing consumer confidence are aiding the industry’s rebound.

Strengthening auto sales came amid a backdrop of a generally improving economy.

New claims for unemployment benefits fell again last week to 348,000, the lowest since March 2008.

Five thousand fewer people filed jobless claims last week than in the previous week, the Labor Department said Thursday. The moving four-week average, a more reliable gauge than the weekly figures, also decreased by 1,250, to 355,000.

Volkswagen Group of America said Thursday that it will add 800 jobs at its factory in Chattanooga, Tenn., to increase production as it sells more cars.

And the Conference Board said its index of leading economic indicators rose in February in the biggest increase in nearly a year.

The index, which includes improving measures such as income and sales, jumped 0.7% last month to 95.5 after rising 0.2% in January and 0.5% in December. That’s the biggest increase in 11 months. It now stands at its highest point since June 2008.

Speaking of reviving the Datsun brand, Mr. Carlos Ghosn, Chief Executive Officer of Nissan Motors told media on his recent visit to Indonesia that the company will be showing a renewed interest in reviving the Datsun Brand and Indonesia would be their main markets.

Datsun, being small, green and compact, it was ideally suited for a country like Indonesia.  Officials at Nissan Motors met Susilo Bambang Yodhoyono, President of Indonesia wherein their showed their interest in pumping in investments of $400 million in further accelerating production in the plants in the country by the year 2014.