Global automakers gain edge in North America production

Sunday, 14 January 2018 21:01 Written by  Read 6 times
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more under construction in the U.S. and Mexico — the transplants are expected to account for more than half of North American auto production for the first time in 2018.

In 2017, domestic manufacturers represented 50.7 percent of production, to 49.3 percent for foreign automakers. A decade ago, Detroit led handily, 63-37.

And the trend is showing no signs of letting up. BMW and Toyota Motor Corp. are building plants in central Mexico, while Volvo Cars plans to open its first U.S. plant, this summer in South Carolina. Toyota and Mazda Motor Corp. last week chose Alabama for a plant they intend to open in 2021.

The building boom, supported largely by rising exports from North America, is expected to push production higher in the coming years, even as U.S. auto sales decline. Exports to other continents rose to 1.4 million vehicles in 2017 from 1.3 million in 2016, according to IHS Markit, which projects that figure to eventually top 2 million.

"Until 2016, the high seas were raising everything. That's not the case anymore," said Joe Langley, IHS' associate director of North American forecasting. "This highlights how North America is much more globally engaged now. It used to be that a lot of what we did here just stayed here."

Product launches also are pushing output higher. IHS expects 24 North American-built vehicle introductions in 2018, with nine of those being built here for the first time. Those nine vehicles are expected to generate about 150,000 units of incremental production.

Overall, IHS predicts production will rise 1.4 percent in 2018, to roughly 17.4 million vehicles, from 17.17 million last year.

End of the growth streak

First declines since 2009
N.A. production change from 2016U.S. sales change from 2016
Industry avg.–4.2%–1.8%
Production includes estimates for some manufacturers not normally estimated.
Source: Automotive News Data Center
U.S. production
2017 production*Change from 2016
*Includes estimates for select models
Source: Automotive News Data Center
Canada production
2017 production*Change from 2016
*Through November
Source: Automotive News Data Center
Mexico production
2017 production*Change from 2016
*Through November
Source: Automotive News Data Center

North American production fell 4.2 percent in 2017, according to the Automotive News Data Center. That's the first decline since 2009.

And it's more than double the 1.8 percent slide in 2017 U.S. light-vehicle sales, suggesting that automakers are getting ahead of the market's decline rather than waiting for inventories to pile up before slowing assembly lines.

Fiat Chrysler Automobiles and BMW Group made the biggest production cuts in 2017. Both companies' U.S. sales declined more than the industry average.

In contrast, Subaru and Volkswagen Group of America boosted production by double digits. Tesla also had a double-digit increase, though from a much lower base as it began making the Model 3.

The only other major automaker to build more vehicles last year was Hyundai-Kia, even though its sales plunged 10 percent. Kia more than doubled output in Mexico in the first full year of its new plant there.

Mexico's rise

Auto production in Mexico rose about 10 percent last year, while U.S. output declined for the first time since 2009.

In the U.S., Ford Motor Co. was again the largest manufacturer of cars and trucks in 2017. Ford has a larger U.S. factory work force than General Motors, which is the biggest producer in Mexico. GM production in Mexico rose 12 percent last year, while its U.S. output dropped 7.4 percent.

FCA shifted a significant amount of its production south of the border last year, building 27 percent fewer vehicles in the U.S. and 13 percent fewer in Canada but 39 percent more in Mexico.

VW built 13 percent more vehicles in Mexico last year and 50 percent more in the U.S., making it the only company to increase production in both countries.

Honda was the only automaker that boosted output in Canada last year.

Mexico's role in the auto industry has surged in recent years, buoyed by cheap labor and free-trade agreements that encourage manufacturers to use the country as a global export hub. Data released by Mexico's auto industry last week revealed that a record 2.33 million vehicles were sent from that country to U.S. dealerships last year, 9.4 percent more than in 2016.

Mexico accounted for 22 percent of North American auto production in 2017, up from 13 percent a decade earlier, with the number of vehicles built there nearly doubling over that period.

Meanwhile, the U.S. went from representing 70 percent of North American production in 2007 to 67 percent last year, even though it built more vehicles. Mexico's rise has been felt more in Canada, which fell from 17 percent a decade ago to 11 percent in 2017.

A decade ago
Source: Automotive News Data Center

Transplants vs. domestic

Total North American production rose 18 percent from 2007 — the year the industry plunged into the Great Recession — to 2016, when automakers built a record 17.9 million vehicles, before declining last year.

Four automakers have at least doubled North American production over the past decade: BMW, Mazda, Subaru and Hyundai-Kia. Subaru's growth stems from its nine straight annual U.S. sales records. BMW sales, in contrast, have been relatively flat over the period, but its South Carolina plant exports a rapidly expanding lineup of crossovers. The BMW brand now produces more vehicles in North America than it sells here.

On the other end of the spectrum, two automakers — GM and FCA — built fewer vehicles in North America last year than in 2007. Both have had their U.S. market share shrink over the period. Ford production grew 8.7 percent.

Outside of the Detroit 3, the smallest production increases since 2007 were 19 percent for Toyota and 29 percent for Honda Motor as the transplant automakers sourced more vehicles popular among their U.S. customers locally rather than importing them from Europe and Asia.

CR-V vs. Impala

It's no surprise that crossovers and midsize pickups were among the top segments responsible for the industry's production increase since 2007, while minivans and many car segments declined. Honda makes nearly eight times more CR-Vs now, while GM built 17 times more Chevrolet Impalas a decade ago than last year.

But a few cars are made in higher volumes now, with automakers compensating for lower North American demand by supplying other markets. Nissan's compact Sentra is among the top vehicles exported to other continents from Mexico, for example.

Inventories stay healthy

GM and Ford entered 2018 with less U.S. inventory than a year earlier, despite posting lower sales, too. Keeping inventories at healthy levels in a declining market reduces the chances automakers will have to roll out big discounts, cutting deeper into profits.

"We're really well positioned from an inventory standpoint heading into 2018," Mark LaNeve, Ford's head of U.S. marketing, sales and service, said Jan. 3. Ford said it had a 68-day supply to start the year.

GM, after letting inventory top 100 days as recently as August in preparation for plant downtime related to model changeovers, cut that to just 63 days going into January.

A decade of change
2017 production2007 productionChange
Jeep Grand Cherokee272,989127,518114%
Jeep Wrangler264,829156,71669%
Chevrolet Suburban70,51846,59451%
Cadillac Escalade50,93761,857–18%
Lincoln Navigator11,92726,161-54%
Full-size pickups
Ram pickup635,930410,72555%
Ford F-150699,814509,51037%
Ford Super Duty352,844323,7139%
GM Sierra280,832269,2884.30%
Nissan Titan65,95969,850–5.6%
Chevrolet Silverado635,258747,628–15%
Toyota Tundra136,036240,101-43%
Midsize pickups
GMC Canyon42,25423,21082%
Chevrolet Colorado129,34385,40051%
Nissan Frontier89.06563,12341%
Toyota Tacoma233,393192,42521%
Honda CR-V463,24859,772675%
Chevrolet Equinox345,593105,260228%
Jeep Compass182,69867,603170%
Ford Explorer316,012162,57594%
Ford Escape367,270209,77475%
GMC Acadia158,611103,05954%
Hyundai Santa Fe/Sport162,078116,98539%
Premium crossovers
Lexus RX114,25778,07446%
Mercedes-Benz GL54,46441,82730%
Acura MDX112,96394,02520%
BMW X5155,324129,44020%
Compact cars
Nissan Sentra283,494125,175126%
Toyota Corolla374,362359,4914.10%
Ford Focus179,110191,115–6.3%
Honda Civic357,111402,406–11%
Chevrolet Cruze/Cobalt180,457226,314–20%
Midsize/large cars
Chevrolet Malibu222,201130,59870%
Nissan Maxima69,96346,04252%
Hyundai Sonata138,166133,5343.50%
Honda Accord322,551382,654–16%
Nissan Altima261,872338,609–23%
Toyota Camry341,032447,934–24%
Cadillac CTS19,55955,934–65%
Chevrolet Impala18,148315,114–94%
Sports cars
Ford Mustang120,780144,459–16%
Chevrolet Corvette22,97336,597–37%
Toyota Sienna126,976159,453–20%
FCA minivans246,625351,089–30%
Honda Odyssey120,755196,043–38%
Figures are January through November of each year
Source: Automotive News Data Center
Automotive News

Automotive News is a weekly print newspaper written for the automotive industry, primarily individuals associated with automobile manufacturers, suppliers and manufacturers. Based out of Detroit and owned by Crain Communications Inc, Automotive News is considered the newspaper of record for the automotive industry. The brand has a team of more than 55 editors and reporters worldwide.