The auto industry is a headline-grabber these days, for multiple reasons. Technology is revolutionizing the entire space. Globalization is altering the production base. Protectionism is threatening to upend the rules of the game. And at the same time, sales are sky-high, especially in the US. That’s leading to speculation about future direction. Some see an imminent recession; will sales be up, down or sideways?
The auto industry recovered long ago
First, a little perspective. Things today are a long way from the Detriot-3’s near-death experience in 2009. Back then, if it wasn’t apparent before, average people quickly got an appreciation of the vast and substantial linkages of the auto sector to the rest of the North American economy. Well, the sector has handily put those dark days behind it, becoming one of the first – and for awhile the only – sector to fully recover, an experience that was shared in the US, Canada and Mexico.
Sales are now about as high as they get in the US, and they are holding firm there – by all appearances, they’re on auto pilot. At the same time, the trend in Canada and Mexico has mostly been up. Combine these three, and the industry is going full-tilt to meet demand. Capacity utilization is way beyond pre-recession levels, and investment seems to be badly needed. But expansion plans have been thrown into confusion by neo-protectionism. ‘America-first’ policies threaten to change content rules, and in the meantime there’s heavy pressure to invest stateside.
This was excerpted from an 26 April 2018 commentary by Peter Hall of EDC.