Scotia Economics says the terrorist attacks in New York and Washington on September 11 will aggravate the slowdown in the North American auto market.

U.S. vehicle sales will be impacted most and are expected to drop below an annualized 15 million units over the next year. In Canada, purchases will likely decline to about an annualized 1.4 million units over the next several months, with volumes in Central Canada most at risk.

“As consumers become more cautious in view of eroding confidence and deteriorating economic fundamentals, we can expect to see a further decrease in auto sales across North America in the months to come,” says Carlos Gomes, Scotiabank’s auto industry specialist. “In the United States, for example, vehicle sales posted large declines during the Gulf War and the Russian default problem in 1998.”

According to the report, the expected slide in U.S. vehicle sales represents a 16% drop from last year’s record of 17.4 million units — a downturn similar to the slump witnessed during the recessions of the mid-1970s and early 1990s.

On a more positive note, Gomes says “vehicle affordability in the United States is at the best level in two decades and will help to cushion the downturn.”

In Canada, the depth and duration of the fall-off is expected to be more muted than south of the border. “In contrast to the United States, many Canadians are still driving cars and light trucks that are at least nine years old and replacement potential is greater,” comments Gomes.

“We anticipate production across North America to decline to 14.4 million units in 2002, from an estimated 15.7 million this year and a peak of 17.7 million last year,” says Gomes. “Despite a cost and productivity advantage vis-à-vis the United States, assemblies at Canada’s auto plants are likely to experience a larger percentage drop next year than their counterparts in the United States and Mexico. This reflects new plant openings in the U.S. and expansions in Mexico, reducing Canada’s share of North American capacity to 17% from 17.3% in 2001.”