North American Auto Industry Headed for Banner Year in 2015

Calendar-year 2015 could be an all-around record year for the North American market.

Combined light-vehicle sales and production in Canada, Mexico and the U.S. have a shot at besting the all-time highs set in 2000, when sales totaled 19.76 million units and vehicle assemblies topped out at 17.16 million.

In 2014, production will end at an estimated 16.94 million units and sales will finish at a projected 19.4 million. The production total will be an 8-year high and sales a 9-year best.

Higher sales and export output have propelled production, but increased local sourcing also has played a role.

The sales share of domestically made vehicles vs. overseas imports dropped to a record low 72.9% in 2009. However, largely aided by increased local sourcing, penetration of domestically produced vehicles has steadily risen since then and will account for 79% of sales in 2015, highest since 80% in 2002.

Six new plants opened in North America from 2011 through 2014, adding a combined 930,000 units of annual available straight-time capacity. Overall, including increased capability at already existing facilities, available straight-time output in 2015 of 17.84 million units will be over 4 million units higher than 2009.

Both Canada and Mexico will wrap up 2014 with record sales volumes, and both are poised to match or exceed this year’s totals in 2015.

The main driver in North America remains the U.S. market. U.S. sales will end 2014 at 16.4 million, a 9-year high. Sales are forecast at 16.8 million units in 2015. However, if fundamental economic indicators continue the solid path they’ve taken in the last half of 2014, and especially if fuel prices maintain their current long-time lows for the entire year, there is a good possibility of reaching 17 million for the first time since 2000.

U.S. sales results in January and February could slow from second-half 2014’s strong performance, estimated at a 16.8 million seasonally adjusted annual rate.

Expected strong U.S. sales in December, forecast at a 17.0 million SAAR, will leave U.S. inventory below year-ago for the second straight month. While inventory on hand will be enough to support the volume needed for a continuation of second-half 2014’s results, it could alleviate enough pressure to move the metal should sales temporarily fall noticeably short of second-half 2014’s results.

Barring a repeat of the bad weather in winter 2014 that pushed a significant portion of sales from the first two months of the year into March, with some spillover into Q2, early 2015 volumes will look strong year-over-year even if monthly SAARs fall short of July-December 2014’s performance.

North American production gains year-over-year are forecast in each quarter in 2015, but the increases will be higher in the second half.

Based on comparisons with 2014, production will seem weaker than it should throughout the first seven months of the year, partly due to tooling changes in first-half 2015 for new or redesigned models that temporarily close or slow production at some plants. Also, some production in 2014 can be attributed to inventory buildup in preparation for the aforementioned shutdowns, compounding the dampening to year-over-year comparisons.

Another reason year-over-year production comparisons will seem low is that in the spring and early summer of 2014, output in some cases got ahead of demand, leading to excess inventory for some vehicles, especially cars. That led to a selloff of  ’14-model-year inventory in August when the SAAR surged to 17.4 million units after running at a much lower 16.2 million pace year-to-date through July.

Lower inventory and some production slowdowns in first-half 2015 likely mean a huge summer selloff will not be necessary this year. Thus, if economic growth stays healthy, especially in regard to job and income growth, expect the quarterly SAAR to grow sequentially through Q4.

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