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Sunday, 22 December 2013 21:00

Automotive forecast: Mike Wall, Analyst, IHS Automotive, Grand Rapids

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The automotive market has been shaping up mostly as expected for 2013 with sales at around 15.6 million units and production at 16.2 million units, says Mike Wall, an automotive analyst at IHS Automotive in Grand Rapids. That growth is projected to continue into 2014, although Wall is keeping close watch over a handful of wildcard factors that could become headwinds for the industry. He spoke with MiBiz about his outlook for the next year.

How is the auto industry shaping up for 2014 from a sales perspective?

Next year for the U.S. light vehicle sales market, we’re at 15.9 (million units). When I look at that number, I think there’s upside to it, with one big monster caveat, and that is Washington, D.C. in January, February and March. Whatever happens … around a shutdown or debt ceiling, that’s going to be a big determining factor. It’s not going to derail the industry or anything like that, but what it can do is pull some of the wind out of the sails in the first quarter. That could limit us from breaching 15.9 into 16 (million units). Absent of that, I think we can have a pretty good year.

What else could possibly tamp down growth in the industry?

There are some things we’re watching, that we need to keep a close eye on. Subprime credit is back in full force in autos. It’s a different subprime than in mortgages and I don’t want to overplay it, but it is a factor that’s out there. Incentives are coming in pretty strong. I wouldn’t say that they’re returning to what we saw when we went through the downturn, but they’re pretty engaged. But I would also say the automakers and suppliers alike are making some pretty good money at these selling rates. There’s some internal incentive there to keep stoking the fire somewhat, within reason.

What’s the outlook from a production standpoint?

Production-wise, we’ll do about 16.2 million this year and next year we’re looking at just over 16.8 million units in North American production. We’re well beyond pre-crash levels at that point. We’re beyond it this year. The recovery in North American production has been a little more swift than in sales for a few reasons. In addition to the demand recovery, you’ve got automakers bringing on more capacity here for import substitution and the export activity coming out of the North American market. That’s a tailwind for us here.

What are some of the wild cards you’re watching for the supply chain?

Capacity constraints are still going to be coming into the mix on the supplier side. That’s been something we’ve even had to navigate this year. … Could we see some spot shortages here and there? Sure, but I get the sense that suppliers are ramping up their investment. Commercial credit for manufacturing is really re-engaged from commercial banks. We’re seeing a much friendlier credit environment even at the manufacturing level.

How about the pace of new vehicle launches next year?

The vehicle launch activity is just going to be crazy with 36 vehicles launching. Anytime you have that level of vehicle launch activity mixed in with a strong build rate and demand rate, you could definitely run into issues here or there. It’s bound to happen, but we’re going to be able to navigate that.

What’s your biggest concern for 2014?

The thing I’m watching the most on the downside is to any extent D.C. causes issues for us and causes problems, particularly in the first quarter to first half of next year. Beyond that, I think things are setting up pretty nicely for next year. You’ve got a production environment where most of the vehicle manufacturers will be gainers.

Is it fair to say that next year looks a bit more manageable for the suppliers after a run of double-digit increases?

Yeah. On a production basis next year, we’re looking at 4-percent growth. So that’s manageable growth on the production side. It will start to ramp up a little further as we head into 2015 and 2016 as some of that other capacity comes on. But that’s been the beauty of this recovery in North America. It’s been pretty robust, but not so robust that it’s derailing any automaker or supplier. It’s been pretty well managed.

Interview conducted and condensed by Joe Boomgaard

Read 3697 times Last modified on Sunday, 22 December 2013 21:29

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