First-Quarter 2018 North American Output Set for Downturn

Closing in on the last month of the year, North American light-vehicle production appears on track to topping 17 million units for the third straight year – but just barely.

Furthermore, although ultimately it is expected to end above 17 million units next year too, production will start out 2018 slower with LV output pinned at 4.44 million units, 1.5% below January-March 2017. The Q1 downturn will mark the fourth straight quarter with a year-over-year decline.

However, Q4 2017 production plans were lifted by nearly 10,000 units to 4.153 million, 4.3% below like-2016’s total. The revision from last month’s outlook for the period included a 19,000-unit increase in trucks, partially offset by a cut in cars of 9,000.

If the Q4 plans hold firm, LV production in 2017 will end at 17.04 million units, a 3.9% decline from 2016’s record 17.73 million and well below 2015’s 17.45 million. But 2017’s final total will mark the first time production topped 17 million in three consecutive years.

In the U.S., where about 80% of North American production ends up, dealers remain mired in excess ’17-model inventory though the situation is improving. However, the onus mostly has shifted to import vehicles. Inventory of domestically made vehicles, thanks to a combination of production cuts and recent sharp boosts in U.S. demand – albeit through higher retail incentives and replacement volume for storm-damaged vehicles – is falling closer in line with the market.

After the scheduled year-over-year decline in Q1, production overall during the remainder of 2018 is expected to post lukewarm growth.

By country, production in Q1 will decline from like-2017 in Canada and the U.S., but Mexico output is expected to rise 7.0%. For all of 2018, production is forecast to rise from 2017 in both the U.S. and Mexico, but decline for the second straight year in Canada.

Nearly all manufacturers are slated for year-over-year shortfalls in Q1 2018. Exceptions are those that recently have added capacity and new products to their North American footprint. Q1 increases are expected from Kia, Subaru, Tesla and Volkswagen Group.

Light-truck output in Q1 is expected to increase 1.8% from like-2017, but cars are planned for a 7.6% decline. That will mark somewhat of an improvement in car output which is expected to decline 16.8% in Q4 2017 following average declines of 13% in the past three quarters.

For 2017, U.S. production should end at 10.94 million units, 8.2% below 2016. Canada calendar-year output – 2.15 million – is expected to end 8.6% below last year, while Mexico will surge 14.3% to 3.95 million.

Final production in 2017 will be a record high in Mexico, but will be 4- and 6-year lows in the U.S. and Canada, respectively.

Including medium- and heavy-duty trucks, total North American output is pegged at 4.29 million units in Q4 2017, 3.2% below year-ago. The year will end at 17.53 million units, 3.45 million below 2016’s 18.15 million.

Total output for Q1 2018 is projected at 4.56 million units, 1.1% below same-period 2017.

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