North American automakers will finish 2015 with all-time high production, but fall just short of the 18 million mark for total vehicles.
With North America sales, including medium- and heavy-duty trucks, forecast at 21.5 million units next year, topping the record set this year of an estimated 21.2 million, production should easily surpass 18 million units in 2016 to meet demand for locally made vehicles.
Forecast 2016 production totals 18.2 million vehicles, including 17.7 million light vehicles and 490,000 medium- and heavy-duty trucks. The LV total is 1.2% above the estimated 17.44 million in 2015, while the big-truck volume is 4.9% under 2015’s estimated total of 515,000.
Total estimated vehicle output in 2015 of 17.96 million units is 1.1% above 2014’s 17.42 million and will topple the previous high of 17.66 million in 2000. LV volume this year will be a new record – beating 2000’s 17.16 million – while big-truck output will be a 9-year high.
Aiding increases to LV production in 2016 will be two new facilities starting operations in May in Monterrey and San Jose Chiapa, Mexico, for Kia and Volkswagen, respectively. The Kia plant starts with the Kia Forte – adding the Rio in early 2017 – and VW’s site will assemble the Audi Q5 luxury CUV.
A third facility opening next year in April is Honda’s Performance Manufacturing Center near its current Marysville, OH, plant, to assemble the premium-priced Acura NSX sports car.
However, 2016 will start out somewhat slow on a year-over-year basis, including some months in the first half with lower production totals vs. the same year-ago periods, largely caused by General Motors and FCA US slowing production at some plants for facility upgrades and changeovers to new products.
Also muting production growth relative to rising demand is that sales gains are centered in trucks, especially CUVs. Relatively weak demand for cars is limiting production in North America. Conversely, while surging demand is a boon to North American truck output, much of the demand for CUVs is being fed from overseas plants, including several domestically produced trucks being dual-sourced from plants in Japan and South Korea due to capacity constraints.
Furthermore, capacity for several other domestically made strong-selling trucks is maxed out, or close to it, while other models in high demand, particularly luxury CUVs, are sole-sourced from overseas.
More pressure on truck capacity is expected in 2016 with sales penetration of the vehicles expected to climb from 2015’s record 56% to 58%, or possibly higher if average fuel prices in the U.S. stay around the $2.00-per-gallon level. Truck penetration in the U.S. alone easily could top 60% for all of 2016 if fuel prices continue to fall.
However, there are product-sourcing changes coming at some plants in 2016 that will help alleviate the capacity crunch, at least in CUVs.
GM will be adding new products at its plant in Spring Hill, TN, that effectively will increase CUV capacity for the automaker. Production of the all-new Cadillac XT5, which replaces the SRX, and the redesigned GMC Acadia both start in first-half 2016 in Spring Hill. Production of the current Acadia in Lansing Delta continues into the second half of the year.
In August, Nissan begins production of a new B-sized CUV in its Aguascalientes 2, Mexico, plant. The plant builds the Nissan Sentra small car and addition of the CUV will more fully utilize the site’s capacity.
In September, Honda begins dual-sourcing its small Honda HRV locally when the vehicle starts rolling off the line at its El Salto, Mexico, plant. HRV production will continue in Honda’s Celaya, Mexico, facility, and additional local sourcing is expected to replace HRV versions imported from Japan.
Also, besides adding Q5 output in Mexico, which replaces the imported version, Volkswagen’s Chattanooga, TN, factory will launch production of the all-new CrossBlue middle CUV in the fourth quarter. Like Nissan’s Aguascalientes 2 plant, Chattanooga is a car facility, so the addition of a CUV should improve capacity utilization.
Besides CUVs, Honda adds production of the new Honda Ridgeline pickup in its Lincoln, AL, plant in April, increasing capacity utilization there and even straining it when the redesigned Odyssey minivan starts output in September. In fact, Honda will be further stretching its limits in truck capacity when the redesigned CRV middle CUV starts production at three plants in September.
The forecast decline next year in big-truck output is rooted in several big-truck manufacturers cutting their 2016 outlooks for heavy-duty, or Class 8, trucks, with production slowdowns already scheduled in the first quarter.
While demand for medium-duty (Classes 4-7) trucks is expected to rise in 2016 from 2015, the heavy-duty slowdown is enough to cause the production forecast for Class 4-8 trucks to decline next year, breaking a string of six straight increases.