North American Auto Production Projected to Increase 7 PercentBy Bill Visnic January 18, 2011
Auto production in North America will increase by 7 percent this year, according to one auto analyst, while the often-cited "downsizing" of the U.S. market begins in earnest.
At the recent Society of Automotive Analysts Automotive Outlook Conference prior to the Detroit auto show, Jeff Schuster, executive director of global forecasting for J.D. Power and Associates, said that although there will be a production increase to about 12.6 million vehicles this year, he doesn't expect automakers to build the excessive inventories that in prior years led to the incentive wars and unprofitable sales that helped lead companies such as General Motors Co. and Chrysler Group LLC into bankruptcy.
The Power forecast for 2011 auto sales in the U.S. is 12.8 million units, but the firm has indicated sales are more likely to be higher than lower in relation to the forecast. Edmunds.com forecasts 12.9 million sales for 2011.
At the conference, Schuster also offered the firm's projection for production levels for several automakers, led by a 47-percent jump for BMW thanks to a large expansion at its assembly plant in Spartanburg, SC. BMW announced last fall it is slated to build approximately 240,000 vehicles in Spartanburg in 2011, which would be a 50-percent production increase. The Spartanburg plant now will be the sole global source for the X3 compact crossover.
Other big North American manufacturing increases this year will come from Hyundai/Kia, which Power said will hike production by 19 percent; Volkswagen production will increase by 21 percent with an all-new assembly plant in Chattanooga, Tenn., where it will produce the new Passat, and the Hyundai Group will increase production by 19 percent.
The firm projects smaller production increases for the U.S. domestic automakers, forecasting a 5-percent increase for Ford Motor Co. and 2 percent for GM, although Chrysler is projected to hike assemblies by 14 percent.
Between 2006 and 2010, automakers collectively reduced North American production by 1.5 million units. Nonetheless, Schuster said capacity is likely to be about 29 percent higher than sales - a figure barely changed from 2006, when North American auto-assembly capacity was 30 percent greater than the annual sales rate.
Purchase, Downsizing Cycles Begin?
Although the number of vehicles sold this year is almost certain to increase, analysts at the SAA Automotive Outlook conference largely agreed that with production schedules so closely aligned with projected sales, there is likely to be little need for automakers to resort to deep incentives to move the metal.
Ford chief economist Ellen Hughes-Cromwick said various data suggest that as the recovery gains strength, a global buying cycle could begin. She said that has been a rare decline in the number of vehicles in operation in the U.S. to as low as 241 million, and added that the number of vehicles per 1,000 drivers in China, long the fastest-growing auto market, still is astonishing short of U.S. standards. In China, there currently are 48 vehicles per 1,000 drivers, compared with 1,022 in the U.S.
"We have a scarcity of product out there," Hughes-Cromwick said.
Callum MacRae, global leader at Autofacts, projected the long-battered German auto market to recover by 8 percent this year to about 3.2 million sales as the broad European market is expected to slowly recover. He cautioned, however, that new austerity budgets in several western European nations present a potentially large downside risk to improved sales.
He added the increasing emphasis to regulate carbon-dioxide emissions will add pressure to European automakers, but the solutions that lead to CO2 reduction - downsized vehicles and engines and alternative powertrains - helps to make the European automakers more competitive globally, particularly in China.
Downsizing also will be taking hold in the U.S., said Power's Schuster: he said 40 percent of all product "activity" in the U.S. will be in the smaller market segments in 2011. He added that market share for trucks will continue to trend downward, from 20 percent currently to 16 percent by 2015. In 2016, pending Corporate Average Fuel Economy standards dictate most automakers will have to have a fleet-wide fuel economy of 35.5 miles per gallon.
Photo by Ford
A 2011 Ford Explorer is assembled at the automaker's plant in Chicago.