Domestic Sourcing

As some U.S. auto makers undertake harsh production cuts over the next few years due to falling demand, several car companies will add vehicles currently assembled overseas to the North American manufacturing mix.

Ward's AutoForecasts anticipates the number of foreign-built vehicles switching to local sourcing for the North American market between now and 2010 will be equal to roughly 1.1 million in combined annual sales in the U.S., Canada and Mexico.

Most of the switch will come from vehicles built in Japan and South Korea, with some capacity in Europe also being displaced.

The leader will be Toyota Motor Engineering and Mfg. North America Inc., which Ward's estimates will be replacing 470,000 annual sales of foreign-built vehicles between now and 2010.

Toyota's increase in domestically sourced vehicles begins modestly in 2007 when Subaru of Indiana Automotive Inc. starts building Camrys for Toyota at its plant in Lafayette, IN.

Late last year, Toyota purchased an 8.7% stake in Fuji Heavy Industries Ltd. after General Motors Corp. dissolved its relationship with the Subaru manufacturer.

Toyota assembles the majority of the Camrys sold in North America at its plant in Georgetown, KY, but is expected to import upwards of 80,000 units this year, alone.

Between 2008 and 2009, Toyota is expected to start North American sourcing for at least three other vehicles. Chief among them will be the RAV4 cross/utility vehicle, which starts production at a new plant in Woodstock, ON, Canada, in 2008. Ward's also projects the Toyota Highlander CUV will be assembled in North America by 2010.

Honda of America Mfg. Inc. will replace an estimated 220,000 in annual import sales by adding its CR-V CUV — which started production this summer in Ohio — and increasing local production of the Civic small car, currently built in North America and Japan.

Ward's expects the Civic to be the first vehicle built at Honda's new plant in Greensburg, IN, that opens in 2008. Like the Camry, most Civics sold in North America are built locally.

Still, more than 40,000 imported Civics are likely to be sold in North America this year.

One surprise on the list is GM. Ward's forecast includes vehicles to be built on GM's Global Compact Vehicle Architecture (Delta) and Global Small Vehicle Architecture (Gamma) platforms for production at its greenfield site in San Luis Potosi, Mexico, beginning in 2009.

These vehicles likely will replace several imported small cars, a good portion of them sold in Mexico.

Ward's estimates GM will be replacing an estimated 150,000 units of annual import volume.

However, taking into account demand for the vehicles likely will rise by 2010 due to long-term overall growth in the market and because the plant will serve as an export base for South America, annual production volumes at San Luis Potosi could be much higher.

South Korea-based Hyundai Motor Mfg. Alabama LLC, and its subsidiary Kia Motors Corp. each will be replacing about 110,000 units of annual import sales.

Hyundai added first-time production of the Santa Fe CUV this year at its Montgomery, AL, plant.

Kia opens its first North American plant in 2009 in Georgia. Annual production should be higher than the import replacement estimate due to increased demand for the vehicles it manufactures. While Kia has not revealed what it initially will build, Ward's has the Sorento and Sportage CUVs penciled in.

Despite the volume, import replacements won't translate to overall increases in North America's production capacity.

Plant closures (already planned or predicted by Ward's) will more than offset capacity increases, including gains from import replacements, and actually lead to a small net loss in total annual capacity between now and 2010.