Sunday, December 26, 2010

Facts of the Day: U.S. Auto Industry

After falling in every single year between 1994 and 2009, the market share of the Big Three (GM, Ford and Chrysler) is on pace to increase slightly in 2010 for the first time in 17 years.  Based on year-to-date (YTD) sales through  November from Ward's Automotive, the Big Three will capture about 44% of the U.S. vehicle market this year, up slightly from 43.66% last year (see chart below).  If that happens, it would be the Big Three's first increase in market share since 1993. 
   
Also based on sales data through November from Ward's, the light truck share of the U.S. vehicle market will increase to 50.8% in 2010 from 48.5% last year.  This will be the first time since 2007 that light truck sales will be more than half of all vehicle sales, and the first year since 2005 that the market share of trucks has increased (see chart below). 

Other highlights for the automotive industry include:

1. Capacity Utilization for the U.S. automakers in 2009 was only 45.2%, compared to 62.2% for 2010 (based on full year data).

2. U.S. total vehicle production YTD in 2010 is above last year by 38.7%, from 5.17 million units to 7.17 units.  

3. Vehicle sales in the U.S. this year, at 10.4 million units YTD, are running 11.1% above last year's sales of 9.375 million units.  

Taken together, these facts suggest that the U.S. automotive industry made a strong recovery this year in terms of sales and production, and next year will probably be even better.

12 Comments:

At 12/26/2010 10:08 AM, Blogger KipEsquire said...

It would be helpful to net out purchases by government entities, which -- either explicitly or due to political expediency -- must always "Buy American" regardless of cost or quality considerations.

 
At 12/26/2010 10:28 AM, Blogger VangelV said...

Based on year-to-date (YTD) sales through November from Ward's Automotive, the Big Three will capture about 44% of the U.S. vehicle market this year, up slightly from 43.66% last year (see chart below).

Given the trouble that Toyota ran into, the subsidies received from the federal government, the 'buy American' push made by governments at all levels, and the fact that the biggest growth segment is light trucks this is not very good news for the US automakers.

Capacity Utilization for the U.S. automakers in 2009 was only 45.2%, compared to 62.2% for 2010 (based on full year data).

This means that many more factories need to be closed. While that will eventually turn out to be a positive it isn't a positive for the short term.

Vehicle sales in the U.S. this year, at 10.4 million units YTD, are running 11.1% above last year's sales of 9.375 million units.

The numbers ares still extremely low when compared to the historical high. Consumers have done what they should; pull back and drive their older cars longer.

Taken together, these facts suggest that the U.S. automotive industry made a strong recovery this year in terms of sales and production, and next year will probably be even better.

Unless they are permitted to play accounting games I doubt that the American manufacturers will do 'better' next year. GM is still the inefficient player with too many union rules, too many liabilities, and too many stupid investment decisions. The Volt will be a drain on its resources and will not be considered a 'market success' by any objective measure. The fact that it still needs massive subsidies from bankrupt governments tells us all we need to know. And if gasoline prices keep heading higher those light truck sales are about to dry up fairly quickly as bankrupt consumers find that it is easier to make ends meet if one drives a much smaller vehicle that gets much better mileage.

 
At 12/26/2010 11:06 AM, Blogger Jason said...

It's hard to say whether this is a temporary blip on the downward slide or not. The American auto companies need to see 3-4 years of market share gain before anyone should start popping champaign.

Personally, I think Americans are being silly about their car purchases AND I think the bankruptcies didn't go far enough to realign the auto industry. I'm reserving any judgement until a few things happen:

1. 2011 UAW contract talks complete. We'll see it the clowns learned anything. My prediction: The UAW hasn't learned anything.
2. American's get past the Volt love and we really see how many the market consumes. My prediction: Depends on th design and the price of gas - who knows?
3. Subsidy money in the Kalifornia auto makers runs out and the aftermath. Further gubment capital injections will represent lack of confidence in Us automakers.
4. 2011 and 2012 sales and market share. I think it's easy for US automakers to gain market share when light truck buyers are replacing aging units and the country consumes 12 million units. Let's see when the volume gets to 14 million.
5. Did the corporate auto culture truly go into a "product is king" mode or are they just hitting a lucky streak? We will see.

Overall mode: Cautious...

 
At 12/26/2010 12:24 PM, Blogger Buddy R Pacifico said...

U.S. auto manufacturing must be able to export to gain substantial sales. The recent U.S.-South Korea trade deal highlights the kind obstacles that must be eliminated for U.S. made vehicle exports.

Last year S. Korea sold 500,000 vehicles in the U.S. while only 6000 vehicles of U.S. origin were sold in S. Korea. The ratio is outrageous and not a result of market competition. Was that because of quality, price, design or marketing effectiveness differences? No, it was because of the likely chance that a buying a foreign vehicle would result in a tax audit by the Korean gov't

 
At 12/26/2010 12:50 PM, Blogger Jason said...

Buddy, what South Korean automakers are able to do is a bit unfair. But it would sure help US automakers if the strange bedfellows of the "Alabama - Kalifornia auto bloc" didn't provide preferential treatment to the likes of Toyota and Hyundai.

 
At 12/26/2010 5:18 PM, Blogger Sean said...

Yay bailouts.

 
At 12/27/2010 2:11 PM, Blogger Jet Beagle said...

Buddy: "U.S. auto manufacturing must be able to export to gain substantial sales."

Not sure what you mean when you refer to "U.S. auto manufacturing". I don't think GM and Ford need to export in order to increase sales. All they need to do is:

expand manufacturing in other nations;

form partnerships with foreign automobile companies; and

buy foreign firms.

 
At 12/27/2010 4:32 PM, Blogger VangelV said...

Not sure what you mean when you refer to "U.S. auto manufacturing". I don't think GM and Ford need to export in order to increase sales. All they need to do is:

expand manufacturing in other nations


The way I read it, he means that domestic Ford and GM factories have to increase their exports to other countries. Of course, you are right to point out that if Ford and GM want to maximize their profits it makes far more sense to build their factories abroad where there are no punitive UAW contracts to worry about and to use those facilities to sell to the foreign markets.

 
At 12/27/2010 6:17 PM, Blogger StVIS said...

VangeIV said,

"and the fact that the biggest growth segment is light trucks this is not very good news for the US automakers."

I said for a long time that if the US got hit with high gas prices, the US auto industry would pay dearly for its over-reliance on trucks and large vehicles to make profits. In '08, in response to high fuel prices, consumers ditched pickup trucks and SUVs en masse for smaller vehicles.

With the gas price respite, we've witnessed consumers return to larger vehicles somewhat. However, this likely will be short lived if recent upticks in gas prices are an indicator.

 
At 12/28/2010 10:54 AM, Blogger Jet Beagle said...

StVIS: "In '08, in response to high fuel prices, consumers ditched pickup trucks and SUVs en masse for smaller vehicles."

Are you sure about that? According to reports from the U.S. Bureau of Transportation Statistics light trucks made up 47% of total U.S. vehicle sales in 2006, 2007, and 2008. That's down only very slightly from the average share from 2000 through 2005, which was 48.4%.

Do you have another source of data which shows a plunge in consumer demand for light trucks?

 
At 12/28/2010 12:23 PM, Blogger StVIS said...

Jet Beagle,

Thanks for the link, it clarifies the situation.

 
At 12/28/2010 12:29 PM, Blogger Jet Beagle said...

StVIS,

There are at least two sources for light truck sales in the U.S.: the Bureau of Transportation Statistics and Ward's Automotive. These two sources show slightly different shares for light trucks. I don't have access to the Ward's definition for light trucks, so I'm not sure how it differs.

I think both sources classify Crossover SUVs as passenger cars and not light trucks. The decline in light truck share since 2005 coincides with the emergence of Crossover SUVs as a significant option for U.S. consumers. Because Crossover SUVs and small truck-based SUVs are so similar in features, I think we need to be cautious about making too many conclusions based on light truck share data.

 

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