Pressure points for the Auto Industry The auto industry has shown remarkable resilience in weathering serial shocks over the past three years. The nature of these shocks is evolving but many have yet to abate. This suggests more uncertainty ahead. Rising costs Inflation in Canada surged above 8% y/y this Spring as economies reopened against hampered supply chains. Auto prices were hit particularly hard as semiconductor chip shortages preceded broad based supply constraints. Vehicle Pricing Outpaced Headline Inflation with Onset of Pandemic 20 15 10 5 CPI Sources: Scotiabank Economics, Statistics Canada CPI - new vehicle % change in price inflation since onset of pandemic 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 15 Rising rates Central banks around the world started lifting overnight policy rates in response to high inflation. Canada-along with the US-lifted its rates by 350 bps since the Winter and more hikes are expected yet. Rapid Rise in Interest Rates Driven by a Hawkish Central Bank % Bank of Canada Overnight Target Rate 16 17 18 19 Sources: Scotiabank Economics, Haver Analytics 20 21 22 TM Trademark of the Bank of Nova Scotia. ® Registered trademark of the Bank of Nova Scotia. This report is prepared by The Bank of Nova Scotia (Scotiabank) as a resource for clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor its affiliates accepts any liability whatsoever for any loss arising from any use of this report or its contents.