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back to index backAMERItalk November,  2016


North America Autos: Q3 Build Finishes Ahead of Estimates; Inventory Being Addressed

North America build finished up 1% in Q3, slightly ahead of our estimate for flat growth. Q4 OEM schedules currently show +1% growth, but we believe this could move lower (RWB estimate: down 1%) as OEMs take downtime to reduce inventory. Ford has been the most aggressive of the domestic players. We look for flat North America production in 2017 (on roughly flat US sales), but believe there could be upside to this figure based on localized production (e.g., Audi Q5) or upside in Mexico/Canada.

- North America build finished up 1% in Q3, slightly ahead of our estimate for flat growth. Production remains solid as US sales have sustained a high level of demand, while Mexico and Canada sales are up 10% YTD. Investors have been hyper-focused on North America production after Ford said it would be slowing production at several manufacturing plants. We look for North America production to be flat across 2017 as slightly growth in US demand (+1% yoy) is used to reduce inventory levels. We acknowledge that there could be upside to our numbers based on any incremental impact from localized production (e.g., recent Audi Q5 plant in Mexico) and growth in Mexico/Canada demand.

- Truck production gains share in Q3. Truck production rose 3% in the quarter led by strength in CUV and pickup (+6-7% yoy). On the other hand, car build declined 2% on weakness in large car (-12%).

- Q3 Production details:

----- OEMs gaining share: Subaru (+53% yoy), Hyundai (+18%), GM (+14%).
----- OEMs losing share: Ford (-12% yoy), FCA (-11%), and BMW (-7%).
----- Performance by country: Mexico (+9% yoy), US (+0%), and Canada (-3%).

- Q4 OEM schedules show 1% growth in the quarter. We recently revised our estimate to down 1% yoy as some OEMs likely use the holiday shutdowns to lower inventory levels.

- Inventory levels at domestic automakers increased 3 days sequentially to 77 days, above the normal September level of 70 days. Each of three major automakers currently hold inventory levels above normal. Based on the company’s commentary, we expect most of Ford’s excess inventory to be cleared by end of 2016. General Motors said that it also expects inventory levels to move slightly lower by year-end, but remain higher yoy due to new launches. By platform, the largest inventory levels include Chrysler DS (Ram pickup), Ford CD4 (Fusion), and GM Delta 2 (Chevy Cruze). These three platforms represent 40% of the excess inventory (200,000 units in total).

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Source: BAIRD
- GAI




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