michigan automotive industry update · bodies (inc cabs) of heading 8701 to 8705 2,250 2,654 3,316...
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Michigan Automotive Industry Update
Kristin DziczekDirector, Industry, Labor & Economics GroupCenter for Automotive ResearchGovernor’s Economic Outlook Briefing22 November 2016
“…as we know, there are known knowns; there are things we know we know. We also know there are known unknowns; that is to say we know there are some things we do not know. But there are also unknown unknowns – the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tend to be the difficult ones.”
Donald H. Rumsfeld
12 February 2002
CAR U.S. Light Vehicle Sales Forecast 2016 – 2020
16
.1
13
.2
10
.4
11
.6
12
.8
14
.5
15
.6 16
.5 17
.4
17
.5
17
.6
17
.6
17
.5
17
.2
2007 2008 2009 2010 2011 2012 2013 2 0 1 4 2015 2016 2017 2018 2019 2020
U.S
. LV
SA
LES
IN M
ILLI
ON
S
Source: CAR Research, October 2016
0.6% 0.0% -0.6%-1.7%
3
0.6%
Michigan production and employment slow through 2020.
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
2015 2016 2017 2018 2019 2020
Emp
loym
ent
Pro
du
ctio
n
Michigan Vehicle Production & Automotive Employment Forecasts 2015 – 2020
Vehicle Production Automotive Employment
Sources: Production, LMC Automotive; Employment Forecast: CAR
The Economic and Political Context of CAR’s Forecast
On the positive side…• +2.1 million full-time employees since October
2015• Unemployment rate inched up to 5.0%, but
labor force participation rate increased by 0.3 percentage point from a year ago
• Equity markets are at the historic high• Gasoline is at low level and is expected to
remain low• U.S. housing starts maintained momentum at
annual rate of 1.1-1.2 million units• Light truck market share is over 60%—the
highest level ever• Auto loans are affordable for now, despite
higher light vehicle prices
Not so positive…• Uncertainty over future Trump economic
policies—what can he deliver?• Toughening immigration policies could hinder
domestic output and increase price inflation • The first three quarters of 2016 economic
growth was 1.7%—lower than expected• Total consumption spending on motor vehicle
declined• Business investment contracted due to low
energy prices• Strong dollar will drive higher interest rates and
inflation• Vehicle affordability will drop• What goes up, must come down…eventually
U.S. Share of North American Production is Shrinking.
15.4
12.9
8.8
12.2
13.5
15.816.5
17.418.1 18.4 18.7 18.8 18.7 18.5
10.8
8.7
5.7
7.78.7
10.311.1
11.7 11.9 12.1 12.2 12.3 12.2 12.1
70%
64%
67%
66%
66% 65%
40%
45%
50%
55%
60%
65%
70%
75%
80%
0
2
4
6
8
10
12
14
16
18
20
2220
07
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
201
7
201
8
201
9
202
0
Veh
icle
Pro
du
ctio
n (
Mill
ion
s)
NA Prodution US Production US Share of NA
Source: Ward’s Automotive, CAR
Market Share Breakdown: U.S. Light Vehicle Sales by Automaker, YTD and October 2016
Source: Automotive News and CAR Research
8.1%
8.3%
9.2%
13.0%
13.6%
13.7%
18.9%
8.2%
9.0%
9.4%
13.1%
13.9%
15.0%
17.1%
0% 5% 10% 15% 20%
Hyundai- Kia
Nissan
Honda
FCA
Toyota
Ford
GM
YTD
October
Market Share Segment Breakdown:U.S. YTD LV Segment Sales Y/Y Change – October 2016 vs. 2015
Source: Ward’s Automotive Reports
-12.3%
-9.9%
-8.2%
-6.3%
-4.8%
4.1%
5.4%
5.7%
13.6%
26.6%
-0.2%
-15% -10% -5% 0% 5% 10% 15% 20% 25% 30%
Middle Car
Luxury Car
Large Car
Small Car
Large CUV
Middle CUV
SUV
Pickup
Van
Small CUV
Total
Michigan Motor Vehicle Production:Unchanged from September 2015
State Shares of U.S. Vehicle Production—2016 YTD (September)
0%
5%
10%
15%
20%
25%
30%
-
50,000
100,000
150,000
200,000
250,000
Production MI Share of U.S.
September 2016:208,976
Michigan20%
Ohio13%
Kentucky11%
Indiana11%
Alabama9%
Missouri6%
Tennessee6%
Illinois6%
All Other States18%
Mo
tor
Veh
icle
Pro
du
ctio
n in
Un
its
Source: Automotive News
MI Motor Vehicle Production
2009 avg.:85,647
Michigan Automotive Manufacturing Employment:59,000 Jobs Added Since 2009, Up 53%
MI Motor Vehicle & Parts Manufacturing Employment
15%
17%
19%
21%
23%
-
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
Employment MI Share of U.S.September 2016:
165,000
State Shares of U.S. Motor Vehicle and Parts Manufacturing Employment—September 2016
Michigan21%
Ohio12%
Indiana10%
Kentucky7%
Alabama5%
All other states45%
Nu
mb
er
of
Emp
loye
es
*U.S. data is one month behind state data
Source: Current Employment Statistics, Bureau of Labor Statistics; NAICS 3361 & 3363
2009 avg.:108,100
Segment Breakdown of Michigan Production vs. U.S. Sales:Michigan Production Concentrated on Pickups and SUVs (2016 YTD through September)
Source: Automotive News; Ward’s Automotive Reports
Large Car2.4%
Large CUV13.3%
Luxury Car 10.6%
SUV14.9%
Pickup38.2%
Middle Car 14.6%
Small Car5.9%
Michigan LV Production Share
Large Car1.7%
Large CUV3.2%
Small CUV5.9%
Van6.0%
Luxury Car6.3%
SUV7.4%
Pickup14.7%
Middle Car 15.5%
Small Car16.7%
Middle CUV22.5%
U.S. Share
2,1
67
2,2
42
50
3
1,2
61
70
2
2,3
18
2,3
05
1,0
65
1,7
24
(16
0)
2,0
17
2,9
18
1,3
27
1,0
19
1,0
35
2,2
77
3,2
86
1,3
23
1,3
16
1,1
63
1,9
89
2,6
19
1,2
66
1,9
24
85
1
3,0
99
3,0
41
1,8
81
1,5
47
68
0
2,6
27
3,7
84
2,0
83
1,2
78
26
1
3,6
32
3,3
17
2,2
90
2,2
20
1,9
75
3,3
84
1,8
37
2,2
80
GM FORD FCA US* TO YO TA HOND A
2010
2011
2012
2013
2014
2015
Q1 2016
Q2 2016
Q3 2016
North America Per Vehicle Operating Profits:2010 – Q3 2016, USD Billions
*Former Chrysler Group LLC after 2014 data is for FCA Group instead of FCA US
**Honda also excludes motorcycle, finance, and power products
***Honda and Toyota have yet to release Q3 figures
Source: CAR Research based on companies’ financial reports.
$2
4,9
00
$2
4,1
76
$2
2,7
93
$3
1,6
32
$3
0,8
49
$2
8,0
36
$2
9,0
29
$3
0,4
82
$2
9,9
67
$3
0,2
78
$3
0,0
75
$3
0,1
73
$2
4,0
22
$2
2,8
96
$2
5,7
98
$2
6,7
00
$2
7,9
31
$2
7,7
90
$2
8,7
74
$2
8,9
85
$2
9,8
96
$2
9,3
46
$2
9,2
02
$3
1,7
32
$2
7,6
69
$2
9,6
39
$2
5,4
66
$2
5,2
53
$2
5,0
08 $
29
,58
1
$2
9,0
86
$2
9,1
32
$2
9,9
26
2007 2008 2009 2010 2011 2012 2013 2014 2015 Q1 2016 Q2 2016 Q3 2016
GM Ford FCA US*
Source: CAR Research based on companies’ financial reports.
*Former Chrysler Group LLC after 2014 data is for FCA Group instead of FCA US
North American Automotive Revenue Per Vehicle @ FCA, F, GM:2007 – Q3 2016
Per Vehicle Labor Cost Changes, 1999-2019
$3
,60
6 $4
,16
7
$1
,77
1
$2
,50
0
$0
$1,000
$2,000
$3,000
$4,000
$5,000
$6,000
1999 2007 2014 2019
Ave
rage
Pe
r V
eh
icle
Lab
or
Co
st
$2
,46
6
$4
,20
4
$2
,40
1
$2
,60
0
1999 2007 2014 2019
$4
,09
1
$4
,49
8
$2
,37
4
$2
,35
0
1999 2007 2014 2019
Source: Center for Automotive Research estimates
2015
Michigan, 41%
Remainder of US, 46%
Canada, 7%
Mexico, 6%
Source: Center for Automotive Research Book of Deals, October 2016
2010 through 2014
Michigan, 34%
Remainder of US, 52%
Canada, 5%
Mexico, 9%
2016 through Q3
Michigan, 24%
Remainder of US, 59%
Canada, 6%
Mexico, 12%
Announced Automotive Investment:
Michigan Captured 24% of NAFTA Investment Through Q3 2016
Recent Research from CAR
Potential Cost Savings and Additional Benefits of Convergence of Safety Regulations between the United States and the European Union
The Growing Role of Mexico in the North American Automotive Industry - Trends, Drivers and Forecasts
Mixed Materials Solutions: Alternative Materials for Door Assemblies
Impact of Automated Vehicle Technologies on Driver Skills
The Impact of New Mobility Services on the Auto Industry
The Economic Implications of Potential NHTSA and EPA Regulatory Revisions on U.S. Light Truck Sales and Manufacturing
The Potential Effects of the 2017-2025 EPA/NHTSA GHG/Fuel Economy Mandates on the U.S. Economy
An Assessment of Powertrain Technology Costs Associated with Meeting CAFE and GHG Standards
Assessing the Fleet-wide Material Technology and Costs to Lightweight Vehicles
Building Capacity and Capability in the Bio-based Materials Manufacturing Sector
The Growing Role of Mexico in the North American Automotive Industry Trends, Drivers and Forecasts
Prepared by
Prepared for
The Growing Role of Mexico in the North American Automotive Industry Trends, Drivers and Forecasts
Prepared by
Prepared for
July 2016
Mexican Automotive Wages are One-Eighth to One-Fifth the
Wages Paid to U.S. Hourly Auto & Parts Workers
5.64
2.47
$0
$5
$10
$15
$20
$25
$30
20
07
20
08
20
09
20
10
20
11
20
12
20
13
Motor Vehicles Parts
27.83
19.91
$0
$5
$10
$15
$20
$25
$30
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
U.S
. D
ollars
/Ho
ur
Motor Vehicles Parts
Average Hourly Wages for Production and Non-Supervisory Workers in Motor Vehicle and Parts, 2007-2014
Sources: U.S. Department of Labor, Bureau of Labor Statistics;
Mexico National Institute of Statistics and Geography (INEGI: Instituto Nacional de Estadística y Geografía)
Mexico is a Global Export Base for Autos and Parts
13 FTAs, 44 CountriesNorth American Free Trade
Agreement (NAFTA)
Colombia - Mexico
Costa Rica - Mexico
European Union - Mexico
Nicaragua - Mexico
Chile - Mexico
EFTA - Mexico
Israel - Mexico
Northern Triangle - Mexico
Uruguay - Mexico
Japan - Mexico
Peru - Mexico
Central America – Mexico
Mexican Production and Exports
• Can reach 60% of global GDP tariff-free
• Nine new plants announced since 2009: $10.6 billion(BMW, Ford, Honda, Hyundai-Kia, Mazda, Nissan-2, Toyota, VW/Audi)
• Exported $46.2 billion in vehicles and $39.9 billion in parts to U.S. in 2014 (Net $63.6 billion)
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
MIl
lion
s o
f U
nit
s
Mexican Production and Forecast
Mexican Production Capacity
Source: LMC and U.S. ITA
U.S.-Mexico Parts Trade: Top Five Categories, 2010-2015
Ranking
By
Volume
2015
2010 2011 2012 2013 2014 2015
5-year
change
Total Motor Vehicle Parts Exports
(In million $) 17,419 21,429 24,292 26,525 29,051 29,989 72.2%
1 PARTS AND ACESSORIES FOR
VHCLS 8701 TO 8705, NESOI
2,795 4,842 4,981 4,186 3,172 4,596 64.4%
2 PTS AND
ACCESSORIES,NESOI,OF
BODIES HDG 8701,8705
2366 1,969 2,065 2,730 2,739 2,686 13.5%
3 COMPRESSION-IGNITION
INTERNAL COMBUSTION
PISTON ENGINES FOR
PROPULSION OF VEHICLES OF
CHAPTER 87, TO BE INSTALLED
IN ROAD
TRACTORS,BUSES,AUTOS,TRU
CKS
1,216 1,693 1,863 2,228 3,779 2,635 116.7%
4 PARTS FOR SPARK-IGNITION
INTERNAL COMBUSTION
PISTON ENGINES FOR USE IN
ROAD TRACTORS, MOTOR
BUSES, AUTOMOBILES OR
TRUCKS
546 934 1,018 1,126 1,257 1,296 137.4%
5 GEAR BOXES FOR VEHICLES
OF HEADING 8703
811 805 941 1,113 1,021 1,100 35.6%
Top Five Auto Parts Exported from the United States to Mexico, 2010-2015
Ranking
By
Volume
2015
2010 2011 2012 2013 2014 2015
5-year
change
Total Motor Vehicle Parts Imports
(In million $) 28,436 34,134 39,376 42,432 46,772 50,142 76.3%
1 INSULATED IGNITION WIRING
SETS & WIRING SETS FOR
VEHICLES, AIRCRAFT OR SHIPS 3,774 4,743 5,510 5,686 6,522 7,074 87.4%
2 OTHER PARTS AND
ACCESSORIES, NESOI, OF
BODIES (INC CABS) OF
HEADING 8701 TO 8705 2,250 2,654 3,316 3,732 4,082 4,482 99.2%
3 SEAT PARTS OF A KIND USED
FOR MOTOR VEHICLES,NESOI 1,398 1,682 2,271 2,634 3,082 3,467 148.0%
4 SPARK-IGNITION
RECIPROCATING PISTON
ENGINES TO BE INSTALLED IN
ROAD TRACTORS,MOTOR 820 1,533 1,832 2,458 2,432 2,279 177.9%
5 PARTS, NESOI, OF MOTOR
VEHICLES, NESOI, OF
HEADINGS 8701 TO 8705, 1,166 1,385 1,630 1,663 1,895 2,185 87.4%
Top Five Auto Parts Imported to the United States from Mexico, 2010-2015
Source: U.S. International Trade Administration
Automaker Investment Announcements2013-2016 YTD through October
Source: CAR “Book of Deals”
Total North American InvestmentAnnouncements
$68.5 billion
Canada $4.4 billion(6%)
U.S. $49.4 billion(72%)
Michigan $18.0 billion(26% of North America)
Mexico $14.8 billion(22%)
White paper and full report
available on the CAR website,
in the Publications section.
Ridehailing Carsharing
Ridesharing Bikesharing
Microtransit
Mobility-
as-a-
Service
Shared
Autonomous
Vehicles
New mobility services are enabled by emerging
technologies and wireless connectivity that allow for
more convenient, efficient, and flexible travel.
Effects on Light Vehicle Sales In North America, 41 percent…
of carsharing members affirm they have foregone or postponed a vehicle as a result of using a carsharing service
In Europe, 32 percent…
In Australia, 28 percent…
In 2021, one carsharing vehicle will
replace
7.7 private vehicles in North America
4 private vehicles in Europe
3.8 private vehicles in Asia - Oceania
Net loss of new and used vehicle sales due to carsharing, 2010 to 2021
Annual Average
Total (2010 to 2021)
North America 15,163 164,606
United States 12,663 137,507
Europe 28,844 267,533
Asia - Oceania 49,213 398,712
Total 93,220 830,850
The Economic Implications of Potential
NHTSA and EPA Regulatory Revisions on
U.S. Light Truck Sales and Manufacturing
OCTOBER
2016
U.S. Light-duty Truck CAFE Targets and 2015 Model Year Pickup Truck Performance Without Credits (Share of Pickup Truck Sales)
11
.4%
1.4
%
1.8
%
0.0
%
3.7
%
1.8
%
1.5
%
0.0
%
9.7
%
1.8
%
1.5
%
0.1
%
36
.0%
11
.7%
2.8
% 5.2
%
6.3
%
1.4
%
0.0
%
0.0
%
1.4
%
0.4
%
0.0
%
0.1
%
53
≤ X
<5
6
56
≤ X
<6
2
62
≤ X
<6
6
66
≤ X
<7
0
70
≤ X
<7
2
72
≤ X
<7
7
53
≤ X
<5
6
56
≤ X
<6
2
62
≤ X
<6
6
66
≤ X
<7
0
70
≤ X
<7
2
72
≤ X
<7
7
53
≤ X
<5
6
56
≤ X
<6
2
62
≤ X
<6
6
66
≤ X
<7
0
70
≤ X
<7
2
72
≤ X
<7
7
53
≤ X
<5
6
56
≤ X
<6
2
62
≤ X
<6
6
66
≤ X
<7
0
70
≤ X
<7
2
72
≤ X
<7
7
6 8 . 5 % D O N O T M E E T 2 0 1 5 S T A N D A R D 1 8 . 5 % M E E T O N L Y T H E 2 0 1 5 S T A N D A R D 7 . 7 % M E E T 2 0 1 6 - 2 0 1 9 S T A N D A R D S 5 . 3 % M E E T 2 0 2 0 - 2 0 2 3 S T A N D A R D S
Source: (U.S. Environmental Protection Agency, 2016); Center for Automotive Research analysis
U.S. Light Truck Sales Move in Step with N.A. ProfitsFord and GM Combined North American Profits and Combined U.S. Light Truck Sales,
Q3 2009 – Q1 2016
$(6,000)
$(4,000)
$(2,000)
$-
$2,000
$4,000
$6,000
$8,000
-
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2009 2010 2011 2012 2013 2014 2015
NO
RTH
AM
ERIC
AN
QU
AR
TER
LY P
RO
FITS
, MIL
LIO
NS
OF
$
U.S
. LIG
HT
TRU
CK
SA
LES
IN U
NIT
S
Light truck sales Profits
Source: (Ford Motor Company, 2016) (General Motors Company, 2016) (LMC, 2016)
What is at stake if they don’t?Economic Contribution of U.S. Body-on-Frame Truck Manufacturing, 2015
Economic Impact
U.S. Body-on-Frame
Truck ManufacturingEMPLOYMENT
Direct 84,200
Intermediate 437,300
Subtotal (Direct + Intermediate) 521,500
Spin-Off 821,400
Total (Direct + Intermediate + Spin-off) 1,342,900
MULTIPLIER
(Direct+Intermediate+Spin-off)/Direct* 15.9
TOTAL EARNINGS BY PLACE OF WORK, PRIVATE NON FARM
($ BILLIONS NOMINAL) $98.46
Less: Contributions for Government
Social Insurance $10.51
Less: Personal Current Transfer
Receipts $3.69
Less: Personal Income Taxes $12.36
Equals Private Disposable Personal Income ($ Billions Nominal)$71.90
CONTRIBUTION AS % OF TOTAL PRIVATE ECONOMY
Employment 0.82%
Compensation 1.06%
Source: Center for Automotive Research analysis
Conclusions
• Known Knowns– U.S. auto sales are in the 7th year of a recovery in a highly cyclical industry—and what goes up, must come down– U.S. production involves global companies, using global platforms, and relying on global supply chains– Consumer acceptance of mobility services and automated driving features is high– EU, China and other regulators will move forward with FE/GHG regulations– Michigan and Michigan-based companies rely on “truck” production and sales
• Known Unknowns– When will the economy tip into recession? Will it be global? How deep will it be?– What will President-Elect Trump do to fulfill his promise to get tough on trade? Will others retaliate?– If Trump disrupts NAFTA or trade with China, how will automakers & suppliers respond—retrench in U.S.,
relocate to other low cost countries, or lie low and wait out the 4 (8?) years of this presidency?– What will be the impact of increasingly automatedautonomous vehicles on auto sales & production?– What will be the impact of new mobility business models on the auto industry?– Will Trump’s EPA and NHTSA pull back from FE/GHG regulations?– Is the EIA forecast on future low fuel prices correct?
• Unknown Unknowns– ???