Demand for auto parts is remarkable. According to PIERS data, inbound shipments of auto parts rose 16% (or 7,848 TEUs) in November 2011 over November 2010 to a total of 57,095 TEUs, marking its 25th consecutive year-over-year expansion. Year to date, through November 2011, auto parts imports were up 23% totaling 576,272 TEUs, already above the previous full-year peak of 2006.
Where’s the ceiling for auto parts imports? How high can it go? Strong retail sales of autos and a notable foreign demand for U.S. – made motor vehicles bolstered manufacturing activity in 2011 and demand for auto parts as a result. Although U.S. retail sales of autos are forecast to continue growing in 2012, exports markets will face some challenges. Private consumption in the EU-15 market decelerated sharply in 2011 and is forecast to decline by 0.4% according to recent estimates from the Economist Intelligence Unit. In fact, containerized exports of motor vehicles to top regional market Northern Europe begun declining in the third quarter of 2011, year over year (-7.4%). Northern Europe accounted for 28% of the U.S. auto market (in terms of TEUs) in 2011, from January through October. Recent gains in the foreign exchange value of the US dollar over the euro add to the difficulties.
In addition, top market China ended a two-year stimulus package of tax breaks for new auto purchases which caused a sharp deceleration in auto sales growth in China, from a 32% rate in 2010 down to a 2.5% rate in 2011. The expectation is for tepid growth to continue in 2012. I estimate China accounted for 6 to 7% of the U.S. auto export market in terms of TEUs in 2011, making the third biggest market for the U.S. after the United Arab Emirates and Lithuania. China will also impose new duties on U.S.-built cars which could only enervate U.S. auto exports growth going forward and subsequent demand for auto parts.
Near-sourcing should be paid close attention to (to Mexico, for instance), which could potentially impact the maritime transportation of auto parts.
Although my outlook for the auto parts import trade in 2012 is positive driven by a robust domestic demand, it is likely we won’t see the trade ending the year at a double-digit growth rate like in 2011 but instead in the mid-to high single digit rate.