Automotive logistics companies were breathing easier at the end of 2009. Earlier, global light vehicle sales were projected to drop 14% to around 58m units. Production, which corresponds closely with the revenue for 3PLs, had been predicted below 50m.
But incentives, a rebound in Asia, and gradual recovery have led forecasters to revise upwards. JD Power now estimates global sales of 62m units, a tough but more liveable 7% drop. Production is likely to have dropped 16% to 55.5m units.
But determining what 2010 brings is like surveying a dam after a storm. Leaks remain, but repair has been done from the shoddy patch job to reinforced concrete. With pressure increasing from the river behind it, the question is whether the renovation can withstand the cracks.
Sales will not be the only story for logistics companies but they offer some good news. JD Power predicts a global rise of 1-2% for 2010, which might be conservative. China is unlikely to sustain its recent pace but forecasters expect 5-10% gains there and in south-east Asia for 2010.
The US could be headed for a strong car recovery, following pent-up demand and relatively little ‘payback’ for incentives. Ford has benefited from avoiding a bailout; GM is scarred from its cuts but may be stronger. Both JD Power and CSM Worldwide have predicted sales of 11.5m-12.5m light vehicles in 2010, and ‘normal’ levels of 15m units by 2012.
In Japan, Toyota, Honda and Nissan have improved profitability, while demand for hybrid and future electric models is on the rise. Brazil held up well, meanwhile, but the end of tax incentives might flatten sales.
Europe could drop as scrappage programmes end. Western Europe, following 20% decline in 2009, could see another 5-10% dip. JD Power predicts Eastern Europe, including Russia, will grow by 13%.
The production outlook is mixed. North America has cut capacity to a new “breakeven” at 10m-11m vehicles a year, according to David Cole from the Center for Automotive Research. Production will lag behind sales figures by at least a year but 2010 could rise 20% to 10.4m light vehicles. Nissan and Honda have said they would shift models to the US from Japan because of a strong yen, and Toyota may eventually follow suit.
Western Europe is likely to shed capacity, and suppliers will also suffer. But the European supply base will remain vital. Future bets by Renault-Nissan for electric cars are sprouting battery plants across Europe, for example. Meanwhile, production platforms of European models are being exported globally, including Ford’s Focus and GM’s Cruze to the US; Fiat will do the same for Chrysler. This sharing could mean more opportunities to consolidate loads. As the balance moves between developed and emerging markets, expect more platforms to originate in Brazil and Korea as well.
There is no simple forecast, but an educated guess is the dam holds but creaks loudly. Tier suppliers, which are the bulk of 3PL’s revenue, will continue to suffer, and cost controls across the supply chain will keep rates down.
A wildcard is the oil price. A survey at the Automotive Logistics Global conference revealed only 5% of delegates put fuel as a top concern for 2010, with 48% saying it would be only “slightly higher”. In the following month, the price jumped 23% from $65 to $80 a barrel. This suggests that logistics companies, beat up bad and misled by the earlier price collapse, might be ill-prepared for a rise and its impacts. Let’s hope they are planning to do more than plug up holes in the dam with their fingers.
The production outlook for the US is just one of the many topics being discussed at the Automotive Logistics Global conference on 19-21 September in Detroit. Complimentary places are available for vehicle makers and parts suppliers.