DETROIT (Dec. 30, 2014) — Driven by surging Mexican factories, North American light-vehicle production in 2014 is headed for the second-highest level on record, and 2015 could set an all-time record.
Full-year 2014 output for the U.S., Mexico and Canada will total 17.2 million, up 7 percent from 2013, according to estimates from the Automotive News Data Center. That would fall about 53,000 light vehicles below the 2000 peak of 17.3 million.
Next year could set a record. LMC Automotive has raised its 2015 production forecast by 200,000 to 17.4 million light vehicles, saying low fuel prices and robust job growth will stimulate demand.
A weekly production rate averaging 352,000 vehicles over 49 working weeks reflects five straight years of solid sales increases in the U.S., Canada and Mexico. What's more, Mexico's free-trade agreements covering dozens of other countries have made it an attractive base for exports overseas and to South America.
The surge is testing some suppliers. A fall study by consulting firm IRN said 42 percent of parts makers polled would have trouble keeping up with demand amid further vehicle production next year. Some are hesitant to invest, concerned the growth curve may soon flatten.
For perspective, the 2014 estimate is more than double production five years ago during the Great Recession.
"The growth is all in light trucks, especially pickups and crossovers," said IHS Automotive forecaster Mike Jackson. "There's no question trucks hold sway in North America."
Nissan North America and Fiat Chrysler Automobiles have led this year's North American growth, with production up 19 and 16 percent, respectively.
Their combined addition of nearly 700,000 vehicles is the bulk of the industry's million-plus vehicle gain this year.
Among countries, Mexico is the star in this year's North American output, topping 3 million for the first time. While U.S. output and Canada production are both up 5 percent this year, Mexico has gained 12 percent.
In fact, Mexico has been the production winner all century among the three countries bound by the North American Free Trade Agreement.
Light-vehicle output peaked in 1999 for the U.S. at 12.7 million and Canada at just shy of 3 million units. That year, Mexico's production was less than 1.5 million.
Since 1999, U.S. production has fallen 9 percent, and Canada's has plunged 17 percent, but Mexico's has more than doubled — up 119 percent to 3.3 million.
The obvious edge Mexico has over U.S. and Canada production is lower labor costs. But analysts see several others:
• Logistics costs are less of an issue for Mexico as the U.S. population shifts south into the Sun Belt and Mexico's auto market grows.
• As overseas-based auto makers try to reduce the risk of currency exchange fluctuations, the Mexican peso is pegged to the U.S. dollar.
• While Mexico is part of NAFTA, it also has negotiated unilateral free-trade agreements with dozens of other countries.
Looking out to 2020, IHS Automotive forecasts rapid growth for Mexico, modest gains for the U.S. and a slow decline for Canada.
IHS's Mr. Jackson predicted that “Mexico will take a much more prominent role in North America and in the world.”
Reuters contributed to this report, which appeared on autonews.com, the website of Automotive News, a Detroit-based sister publication of Tire Business.