Steel Markets

US Vehicle Sales and NAFTA Vehicle Production through June 2016

Written by Peter Wright

Light vehicle (LV) sales in June were 16.7 million units, down from 17.4 million in May and from 17.0 million in June last year. All sales numbers in this analysis are at a seasonally adjusted annual rate. Figure 1 shows the auto and light truck components since January 2004.

In June auto sales were 6.8 million units down from 7.1 million in May as light trucks declined from 10.3 million to 9.9 million. The mix was 59.3 percent light trucks which includes crossovers and 40.7 percent autos. In the last three months the percentage of light trucks in the mix has been >59 percent for the first time since the summer of 2005. All the major suppliers, except Land Rover and Volvo, experienced sales declines in June. GM was down by 2.0 percent, FCA was down by 10.7 percent and Ford was down by 6.2 percent. believes that based on fundamentals, light vehicle sales should be about 16.5 million units. The June data brings light vehicle sales closer to that number. Through the end of the year, sales will likely continue in a downward direction. However, accommodative interest rates and rising incomes will help to cushion the blow as vehicle demand moves back to being driven by fundamentals, rather than pent-up demand. Import market share in June was 21.6 percent, down from 22.4 percent in May (Figure 2).

Total light vehicle production in NAFTA in June was at an annual rate (not seasonally adjusted) of 19.565 million, up from 17.486 in May and an all-time high. Total production in 2015 was 17.36 million units and in the first six months of this year was 18.1 million units annualized. In cases where seasonality is more than a weather effect we like to compare the monthly result with the monthly norm over a number of years. On average since 2004, June’s production has been 3.5 percent higher than May but this year production was up by 11.9 percent (Figure 3).

Reminder: These production numbers are not seasonally adjusted, the sales data reported above are seasonally adjusted. July has normally been the month when shut-downs for maintenance and re-tooling occur with the result that assemblies have dropped by almost 30 percent from June on average over the last 12 years. This year Ford has announced that it will shorten the break for some of its SUV assembly plants in the US and Canada from two weeks to one to keep up with increased demand.

On a rolling 12 months basis y/y through June, LV production in NAFTA increased by 3.4 percent which was the same as 12 months through May and is consistent with the growth experienced in the last 12 months as indicated by the brown bars in Figure 4.

On this basis production has been at an all-time high for the last five months. On a rolling 12 months basis y/y the US was up by 3.6 percent with negative momentum, Canada was up by 8.0 percent with positive momentum and Mexico was down by 0.1 percent with negative momentum (Table 1).

Mexico has had negative momentum for fourteen straight months as Canada has had very strong momentum for the last six months. The US has gained production share in the most recent 3 ½ years (Figure 5) at the expense of Canada, though that trend has slowed in the last 12 months when Canada picked up the pace.

Mexico’s share has been fairly flat for five years and has declined in 2016. In June on a rolling three month basis, the US production share of total light vehicles was 67.8 percent, down from 68.5 percent in May, Canada’s was 13.5 percent (down 0.2 percent), and Mexico’s was 18.7 percent (up 0.9 percent). Production in Mexico in 2014 was 3.2 million units, in 2015 was 3.4 million units and YTD 2016 was 3.3 million units annualized. The Mexican production target for 2020 in 5.0 million units according to Eduardo Solis, president of the Mexican Automotive Industry Association.

Figures 6, 7 and 8 show total LV production by country with y/y growth rates and on each the red line shows the change in production since Q2 2006.

Note the scales are the same to give true comparability and that Mexican growth has slowed significantly this year and is now the lowest in NAFTA. Canada has had a growth surge in the last four months and the first positive values since July 2013. Canada’s growth is now the highest in NAFTA. During the recession Mexico declined by less than the US and bounced back by more during the recovery. This caused Mexico’s production share to surge until Mid-2011 at the expense of the US.

Figure 9 shows the percentage of autos in the light vehicle production of each country.

The percentage of autos in the production mix of all three countries has been declining, driven by consumer buying preferences which in turn are heavily influenced by gas prices. The change in preference for light trucks tends to favor the US and Canada over Mexico because the mix of light vehicles is so different by country. The percentage of autos in the Mexican mix in the last three months was 57.9 percent but only 34.4 in the US and 33.5 percent in Canada. This means that Mexico has staked out a higher relative capacity in autos which will serve it well when gas prices eventually rebound.

Ward’s Automotive reported this week that total light vehicle inventories in the US increased by 7 days to 66 days in June which was 6 days more than June last year. Month over month FCA (Fiat Chrysler Automotive) was up by 10 days to 81 days, Ford was up by 5 days to 78 and GM was up by 5 days to 72 days. The inventory build is in preparation for the summer retooling shutdowns.  

The SMU data file contains more detail than be shown here in this condensed report. Readers can obtain copies of additional time based performance results on request if they wish to dig deeper. Available are graphs of auto, light truck and medium and heavy truck production and growth rate and production share by country.

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