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Forecast in Automobile Production and Sales in North America

After seven consecutive years of growth, the U.S. light vehicle sales declined by 1.9% in 2017. How does the automotive industry move toward the future? A seminar “Update on the Automotive Industry in the North America” was held on February 23 at the Wojcik Conference Center of the Harper College, and it was organized by the Japanese Chamber of Commerce and Industry of Chicago and JETRO Chicago.

The speaker was Tsukasa Watanabe, Senior Manager of PwC AutoFacts, Los Angeles Office. The PwC AutoFacts is PwC’s automotive industry analysis team, which collects and analyzes automotive industry information on production, sales, trends, future prospects, and more.

Light Vehicle Production in the World

Estimated global total vehicle production in 2017 is 94 million and expected to increase by 114 million in 2024. Although a high growth is expected in emerging countries and areas such as China, India, and ASEAN, the North American market is very important for automakers.

The forecast number of 2024 includes change of models which may occur during the period. Change of models occurs in Japan about every five years, but the frequency less occurs in other countries.

Production Growth in Regions between 2017 and 2024

The growth of vehicle production is pretty high in North America with 2 million compared to the production between 2017 and 2024. The production increases from 17.1 million to 19.1 million; thus the region is very important for automakers.

In South America, vehicle production grows from 3.2 million to 4 million in the same period.
In Europe, vehicle production increases from 18.7 million to 21.1 million in 2024. A 2.4 million increase is quite high; however, low-cost-vehicle production will grow larger.

In emerging countries in the Asia Pacific area such as China, India, and ASEAN countries, vehicle production increases from 36.4 million to 49.2 million. The growth produces 1.28 million more units than today.

In mature countries in the Asia Pacific area such as Japan, Australia, New Zealand, and South Korea, vehicle production decreases from 12.7 million to 12.3 million due to shrinking population in Japan, GM’s decreasing production in Korea, halting Camry production in Australia, and other factors.

Electric Powertrain Trends in Vehicle Production

The ratio of electric powertrains in vehicle production is 4.8% in 2017, which increases to 14.8% in 2024. The biggest increase is hybrid followed by plug-in hybrid, electric vehicle, and fuel cell vehicle.

Unit Sales of Light Vehicle in North America

Unit sales in the U.S. fell from 13.19 million in 2008 to 10.40 million in 2009, but started growing back in 2010 and continued to grow for seven consecutive years for the first time in the U.S. automobile history. Especially, the unit sales surpassed 17 million in 2015, 2016, and 2017 to set a record.

The unit sales, however, began to decline in 2016 and are predicted to decline until 2021. This is partially due to a purchasing cycle. Consumers who refrained from purchasing vehicles after the economic downturn in 2008 returned to purchase vehicles and are still driving them.

A recent trend shows that consumers buy a more expensive car and take a longer term loan. An average loan term is 5.75 years in the U.S., but consumer have been taking 7 to 8 year loans in recent years. An average purchase price is $33,000. Another factor is declining cash discounts on a vehicle sale and possible increase in interest rates. However, sales will increase in 2022, and 17.2 million units are predicted to be sold in 2024.

Canada and Mexico

In Canada, unit sales reached 2.04 million for the first time in 2017, but began to decline this year and will continue to decline until 2021. Sales again increase in the following year, and 1.96 million will be sold in 2024.

In Mexico, unit sales reached their highest level of 1.6 million in 2016, then declined following year. Unit sales in 2018 are 1.45 million, then increase by 1.79 million in 2024.

Segment Unit Sales of Light Vehicle

In the U.S., unit sales of light truck increased and have become 65% of the entire vehicle sales in 2017. The light truck includes pickup trucks, SUVs, and crossovers, and the sale of crossover has increased to nearly 40% of the entire sales in 2017.

Unit Sales of Light Vehicle by Makers

In the U.S., the top seller of light vehicle in 2017 is GM with 3 million units followed by Ford, Toyota, FCA, RNM, Honda, Hyundai, Subaru, VW, and Daimler.

In Canada, the top seller of light vehicle in 2017 is Ford (over 0.3 million units) followed by GM, FCA, Toyota, Hyundai, Honda, RNM, VW, Mazda, and Subaru.

In Mexico, top seller of light vehicle in 2017 is RNM (just below 0.4 million) followed by GM, VW, Hyundai, Toyota, Honda, FCA, Ford, Mazda, and BMW.

A trend in unit sales shows that sale of expensive cars has increased. In the U.S., sale of expensive cars increased by 1.2% in 2017 while overall vehicle sale declined. Another trend is the sale of light truck increased by 6.3% while sale of sedan decreased by 5.2%.

Popular brands in the U.S. in 2017 are: Ford F-Series (about 0.9 million units) followed by GM Silverado, Dodge Ram PU, Toyota RAV4, Nissan Rogue, Toyota Camry, Honda CR-V, Civic, Corolla, and Accord.

Incentives in the U.S.

In the U.S., an average cash discount is about $4,000 per vehicle in 2017. It has become a tough competitive market where a more than 10% discount is necessary to sell a vehicle when an average purchasing price is $33,000.

The vehicle units imported to the U.S. in 2017 were 1.79 million from Mexico, 1.39 million from Canada, 1.26 million from Japan, and South Korea, Germany, and others. The U.S. government has promoted domestic production, so the number of imports is predicted to decline.

Imported vehicles from Japan are imposed a 2.5% tariff, and light trucks are imposed a 25% tariff, but 1.26 million units are still coming into the U.S. The U.S. market has been an important one for Japanese automakers.

Canada and Mexico together exported more than 3 million units to the U.S. last year, so the impact of NAFTA re-negotiation is big. In Canada, about 90% of vehicle production was exported to the U.S. in 2017 while 60% of Mexican production came to the U.S.

The U.S. exported about 2 million units in 2017. About 53% of the 2 million went to Canada and Mexico, but the amount of the units is only 7% to 8% of the entire production in the U.S. Other main exporters are China and Europe. A SUV boom has hit in Europe, and the US luxury light trucks have made good sales.

Light Vehicle Production in North America

Light vehicle production in North America is predicted to increase toward 2024 while sales decline until 2021. This is because of an increase in domestic production, and world SUV demand to push exports.

Some of the automakers’ factories have been under construction for improvements and will be completed in a couple of years. Toyota/Mazda’s new factory is also coming to Alabama. Those factors will contribute to push domestic production.

In Canada, vehicle production decreases from 1.98 million to 1.73 million in 2024 due to production transfer to the U.S. and impacts from declining U.S. sales.

In Mexico, vehicle production increases from 3 million to near 5 million in 2024 due to completion of new automobile factories and logistic improvements occurring in the near future.

Tsukasa Watanabe, Senior Manager of PwC AutoFacts, Los Angeles Office