March 18, 2015

Auto Industry's Growth 'Unprecedented'

It's common knowledge that the auto industry is booming, but how big is the boom? Automotive is experiencing a period of unprecedented growth, especially in Mexico, reports Bernard Swiecki, senior product manager with the Center for Automotive Research, Ann Arbor, Mich.

CAR forecasts U.S. light vehicle sales of 16.9 million units this year, 17.1 million units next year and 17.4 million in 2017. “This may not look monumental, but it is,” Swiecki said in his remarks Feb. 27 during FMA’s annual meeting in Orlando. “Since the foundation of the industry, there have only been two times when there was a five-year period of growth that was not followed by a down cycle. If we have decent growth this year it will be six years. Next year it could be seven.”

The Mexican economy stands to be the biggest beneficiary of that growth trend. Automotive production in Mexico in the next five years is forecast to grow by 53 percent, versus 7 percent in the U.S. “Their growth has completely passed us by,” Swiecki said, especially in Canada.

Announced investment by automakers in North America in 2014 totaled $18.2 billion, including $10.5 billion in the U.S., $7.0 billion in Mexico and only $800 million in Canada. “It’s a difficult time to be Canadian and attract automotive investment,” he added.

Much of the new investment has gone to Mexico not just because of its labor cost advantage, but because of its free trade agreements. Mexico has free trade agreements with more of the world than any other country, Swiecki said. And because of the country’s narrow shape, it offers easy access to both the Atlantic and Pacific to take advantage of seaborne shipping.

But commerce in Mexico is not always smooth sailing due to its crime, corruption, an inefficient judicial system, high employee turnover, insufficient supplies of raw materials and a lackluster GDP around 1.3 percent. The country consumes only a small percentage of the vehicles it produces, Swiecki noted.

Technological progress, consumer preferences and government regulations are changing the auto industry and the vehicles it offers to consumers across North America. The battle for market share among the different materials being used to make vehicles lighter and more fuel efficient has one clear outcome, Swiecki asserted. “Steelmakers say the solution is high-strength steel. Aluminum makers say the solution is aluminum. Composite makers say they can build cars completely out of plastics. Realistically, all those materials are going to have to learn to get along on the same vehicle.”

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Sunday, December 17, 2017