Automotive Forecast 'Less Than Bullish'

At the close of 2017, the Big Three U.S. auto makers see their market share closing in on less than 44 percent, down from over 50 percent in 2007. This comes as analysts are less than bullish on auto sales in 2018. The National Automobile Dealers Association is forecasting that sales in 2018 will be 16.7 million units, down by 2.5 percent from 2017 and well below the record 17.5 million sold in 2016. Economy.com reported that November U.S. vehicle sales logged a seasonally adjusted annualized rate of 17.5 million units, which was somewhat below forecast, but within the range of consensus expectations. Sales retreated 1.3 percent from a year earlier, returning to negative territory for the ninth time this year. Hurricane-related replacement sales cooled off, but incentive spending remained close to a record. Retail sales performed better than fleet sales. Also, light-truck sales continue to outperform their car counterparts.

Figure 1 shows auto and light truck sales since January 2004. Import market share at 21.7 percent in November was up from 21.5 percent in October, but has changed little in the last 18 months as shown in Figure 2.

NAFTA Vehicle Assemblies

Total light vehicle (LV) production in NAFTA in November hit an annual rate of 17.19 million units, down from 17.26 million in October. On average since 2004, November’s production has declined by 9.9 percent from October. This year, production was down by 5.2 percent, therefore stronger than normal (Figure 3). Year to date through November 2017, production was down by 4.0 percent from the first 11 months of 2016. Note that production numbers are not seasonally adjusted; the sales data reported above are seasonally adjusted.

On a rolling 12-months basis year-over-year through November, LV production in NAFTA decreased by 2.9 percent. September through November were the first months to experience a decrease since May 2010. There has been a very gradual slowdown in growth for the last three years as indicated by the brown bars in Figure 4.

On a rolling 12-months basis year-over-year, total light vehicle production in the U.S. declined by 7.2 percent, Canada declined by 8.3 percent and Mexico was up by 12.4 percent. The comparison is worse for the U.S. and Canada comparing the latest three months when the results are: U.S. down by 10.8 percent, Canada down by 16.9 percent and Mexico up by 11.2 percent (Table 1).

North America is experiencing a huge shift in assembly volume of both autos and light trucks from both the U.S. and Canada to Mexico. The shift south of the border is illustrated in Figures 5 and 6, which show production share for autos and light trucks, respectively. The Mexican light vehicle production target for 2020 is 5.0 million units, according to Eduardo Solis, president of the Mexican Automotive Industry Association. At this rate, Mexico will exceed Sr. Solis’ target.

Figures 7, 8 and 9 show total LV production by country. The brown bars are the respective growth rates and this tells the whole story. The red line on each chart shows the change in production since Q2 2006. Note the scales are the same to give true comparability and that Mexican growth has surged in 2017. In November 2017, FCA (Fiat Chrysler Automotive) produced zero cars in either the U.S. or Mexico. Toyota produced the most cars in the U.S., closely followed by GM and Ford. Ford, GM and FCA, in that order, had the highest volume of light trucks in the U.S. Nissan produced by far the most cars in Mexico in November at 48,045, which was more than twice as many as Ford, which was in second place. Mexico currently exports about 80 percent of its LV production. The U.S. and Canada are the top two destinations with 61.5 percent and 7 percent of the total, respectively.

Figure 10 shows that the percentage of autos in the light vehicle mix has been declining for all three countries since 2012, though Canada has had a recent resurgence and Mexico has moved much more intensively into light trucks. In general, car sales–including four-door sedans, two-door coupes, station wagons and hatchbacks–continue to substantially underperform their SUV, crossover, and pickup truck counterparts.

Ward’s Automotive reported this week that total light vehicle inventories in the U.S. were 71 days at the end of November, unchanged from the end of October. Month over month, FCA’s inventory increased from 85 to 88 days, GM was up from 80 to 83 days and Ford was down from 79 to 78 days. To put those results into perspective, Toyota was up from 58 to 59 days. Figure 11 shows that in 2017, in spite of the October/November increase, the auto companies have reversed a two-year trend of rising inventories.

The SMU data file contains more detail than can be shown here in this condensed report. Readers can obtain copies of additional time-based performance results on request if they wish to dig deeper. Available are graphs of auto, light truck, medium and heavy truck production. Also growth rates and production share by country.