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NORTH AMERICA: "Trucks: North America Class 8 Orders As Expected, Class 5-7 Strong (May, 2015)" repo

NORTH AMERICA: "Trucks: North America Class 8 Orders As Expected, Class 5-7 Strong (May, 2015)" report. 8-page report by BAIRD.

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back to index backAMERItalk September,  2016


Autos: North America Build Reflects Stable Environment (download report)

North America production expanded 11% in August, benefitting from two extra build days shifted from July. Build is tracking up 2% quarter-to-date, modestly above our estimate for flat growth. Initial Q4 build schedule calls for roughly 1% growth, consistent with our estimate. Days of supply ticked up to 74 days, which is 10% above normal levels. Higher inventory is concentrated within car segments, which is likely addressed over next several quarters. We believe stable North America production supports low-single-digit global growth (led by Europe/Asia).

- North America production expanded 11% in August. Build benefitted from the shift of two build days from July to August. Combined, July and August production is up 2% versus our Q3 estimate for flat demand. We believe North America production is likely stable at current levels over the next several quarters. At its inventor event last week, Ford (which has been cautious on the market) provided a 2018 end-market outlook that called for stable demand over the next several years. Importantly, we expect global automotive demand to rise low single digits over the next several years given upside in Europe and China/ASEAN markets.

- OEM performance quarter to date:

----- OEMs gaining share: GM (+15% yoy), Hyundai/Kia (+10%), Nissan (+8%).

----- OEMs losing share: Ford and BMW (both -12% yoy), Mercedes (-8%), Chrysler (-6% yoy).

- Production growth has been led by Mexico (+13% QTD) on double-digit sales growth and a manufacturing shift, partially offset by US/Canada build down low single digits.

- Production schedules remain stable. Q3 build schedules still call for +1% growth, modestly above our estimate for flat production in Q3. Initial Q4 build plans are flat to up 1%, consistent with our estimate for 1% growth.

- Inventory modestly above normal in specific segments. Total industry inventory ticked up one day sequentially to 63 days of supply versus the normal level of 57 days. At current demand levels, we believe inventory is roughly 200,000 units above normal. Elevated inventory is seen within Chrysler pickups and Ford Super-duty platforms (25-30% of the excess inventory); Ford CD1 (mainly Fusion), GM Delta 2 (Chevy Cruze) and Honda GFP (Acura TSX) accounted for another 35-40% of the excess inventory.

- Assuming automakers reduce inventory to normal levels over the next several quarters, this is a 100-200 basis point impact to production growth per quarter. Importantly, over the course of this cycle, there have been several times where elevated inventory levels have been rationalized without a major cliff” event.

To download 8-page report, please click here.

Source: BAIRD
- GAI





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