North American light-vehicle production is booming this year thanks to increased exports, import replacements and better-than-expected U.S. sales due to aggressive marketing and new products. But that’s not all.

Auto makers also are boosting output to increase availability on dealer lots by more than is justified by current rising demand.

As LV sales climb to higher levels than the weak results of the last three years, manufacturers will tend toward keeping a higher days’ supply on hand, meaning additional output on top of the production increases will be necessary to maintain current inventories.

Although the goal still will be to keep inventory at an even balance between too much and not enough, the higher days’ supply assures enough trim levels and configurations will be readily available on dealer lots to reduce the risk of lost sales.

WardsAuto is forecasting 2012 North American production of 14.63 million LVs, an 11.9% gain on prior-year’s 13.08 million. This marks the highest total since 15.02 million in 2007 and more than 6 million additional units than the recessionary year of 2009.

An analysis by WardsAuto shows LV inventory, as measured by days’ supply, has been below traditional levels since mid-2009. By increasing capacity through new hires, overtime and additional shifts, auto makers are on a trajectory to normalize supply.

In 2009, when LV sales plummeted to their lowest numbers in decades as the U.S. suffered through one of its worst recessions, auto makers were hit with a wave of bad economic news each month, forcing them to slash output and capacity at unprecedented rates.

Production fell so rapidly in first-half 2009 that days’ supply of domestically produced vehicles tumbled from 126 in January to 65 by the end of June. The decline of 61 days’ was the biggest January-to-June decline as far back as at least 1986, WardsAuto data shows.

The U.S. government’s subsidized “Cash-for-Clunkers” program that began in July 2009 and hit full stride the following month further artificially streamlined inventory by causing a temporary upward surge in sales, leaving dealers headed into September with just 30 days’ supply.

Auto makers quickly returned inventories back on an even keel with demand, as deliveries resumed their weak pace following the end of the Clunkers’ program. However, days’ supply has remained at historic lows since then.

North American auto makers this year had 61 days’ supply at the end of February, which is in keeping with levels for the month since 2009. For the 10 years prior to 2009, the month’s days’ supply averaged 72. That equates to roughly 400,000 additional units, had the industry been able to maintain pre-2009 inventory levels.

Inventory of domestically made LVs since 2009 has averaged 11 days’ supply lower per month than the average in 1999-2008, a WardsAuto analysis shows. By month, the days’ supply gaps range from six less on average for August to 16 fewer in December.

Auto makers now appear hell-bent to increase volume, or in some cases recoup market share, and return to benchmark levels of inventory. Some also may be driven by optimistically high expectations for their products.

But such optimism could result in upward pressure on demand through greater availability of products, advertising, incentives and other marketing means.

The WardsAuto analysis initially anticipated U.S. LV sales, the main driver of North American production, to reach 14.1 million units in 2012.

But deliveries are expected to end the first quarter at a seasonally adjusted annual rate of 14.7 million, meaning it would take a major economic setback for sales to track low enough for the remainder of the year to end up at the initial estimate.

As long as fuel prices don’t soar so high they cut into economic growth, LV sales should finish significantly higher than the WardsAuto forecast at the beginning of the year.

North American inventory buildup in 2012 could mean output won’t be as strong in 2013 unless sales continue to surprise on the high side. The WardsAuto LV production forecast for 2013 of 15.07 million units is 3.3% higher than for this year. Output is expected to rise 6.4% in 2014, followed by a 4.7% gain in 2015.

LV production should be relatively flat in 2016 and 2017, before resuming strong growth in 2018 when the forecast calls for 17.54 million units.

Total annual production of light vehicles and medium- and heavy-duty trucks is forecast at 15.10 million units for 2012, up 12.1% from last year’s 13.47 million, and should top 18 million by 2018.

hstoddard@wardsauto.com