Saratoga Honda’s parking lot is full of new cars, a sharp contrast to last summer, when the auto dealer’s supply chain was severed twice, first by the tsunami in Japan and later by floods in Thailand. The tidal wave and the ensuing nuclear plant leaks in Japan halted auto production there and stopped the flow of parts to the U.S.
“Everything is flowing well now,” said Mark Davis, sales manager of the Saratoga Springs, N.Y., Honda dealer. “The pipelines are full. There is no shortage of cars.”
Although the cars are Japanese, almost every new Honda on the lot is made in the U.S. with parts supplied by Japanese plants. “The only import we’re selling a lot of right now is the 2012 CR-V, which is supplied by a combination of Japanese and U.S. plants, but the Accords and the Civics are almost all American-built,” Davis said.
That’s a sea change in the supply chain of what the industry calls “foreign-badged” cars. Ever more of them are being made in plants foreign manufacturers have set up in the U.S., Canada and Mexico.
As a result, the share of the U.S. market controlled by auto imports is waning after years of growth, while the share of the market controlled by foreign-badged cars made in the U.S. is rising.
But that doesn’t spell a long-term decline in the number of cars moving through U.S. ports, because the actual volume of auto imports will grow as the U.S. market expands. IHS Automotive expects the share of seaborne auto imports to decline over the next three years before leveling off at slightly above 20 percent.
Imports of autos from Mexico, however, are rising as U.S., Japanese and South Korean carmakers expand auto production south of the border. The Mexican automotive sector continues to grow, with Mazda, Nissan, Volkswagen and Honda prepared to invest about $2 billion over the coming years.
The industry doesn’t just drive shipments of auto parts from both directions, but also volumes of raw materials, including plastics, steel and chemicals, said James Commiskey, vice president of business development, automotive, for logistics and transportation provider Pacer International.
Just as the seaborne share of imports is waning, exports of cars made in the U.S. are waxing strong. “The U.S. is becoming an export hub,” said George Magliano, senior principal economist for IHS Automotive. “We’re getting more production localized here because the Japanese, the Europeans and the Koreans want to get away from currency fluctuations.”
The foreign automakers produce cars on common platforms shared among different models produced at plants around the globe. “So they are looking to do global car platforms, which enable them to shift production here and export from here,” Magliano said.
Honda, for example, is building new plants or expanding existing factories in Alabama, Indiana and Ohio. It also is investing $800 million in a new plant in Mexico. Nissan, which exports its U.S.-made models to 46 countries, expects to triple its U.S. export volume in the next two or three years.
Detroit’s Big Three automakers also plan to export more from U.S. plants. Chrysler/Fiat CEO Sergio Marchionne said he plans to boost exports of U.S.-made Jeeps. “What’s more American than a Jeep?” Magliano said.
Most Japanese carmakers have largely restored their supply chains for new cars and parts exports to the United States. Total U.S. imports of auto parts jumped 24 percent last year to 634,204 20-foot equivalent units, with the biggest monthly volumes hitting in October and November as Japanese shipments returned to full flow, according to PIERS, a sister company of The Journal of Commerce. By March of this year, Honda and Toyota had brought U.S. inventories of new cars back to 49 days and 48 days of supply, respectively, levels still short of the typical target levels necessary to meet 60 days of sales.
“Subaru particularly still remains with a low inventory, with a stock of 33 days in March, because their plants were in the region hit by the tsunami, and they have less U.S. production,” said Paul Taylor, chief economist of the National Association of Automobile Dealers.
Nissan’s inventories were less affected than other Japanese automakers, because the company’s plants aren’t near the region hit by the tsunami.
However, South Korean automakers Hyundai and Kia, which weren’t hurt by the tsunami, also have low U.S. inventories of 32 days of supplies, “because they hit home runs and can’t produce enough cars.”
The trend toward more U.S. auto exports can be seen in IHS Automotive’s forecast: U.S. exports of U.S.-made autos will increase to 1.4 million units this year from 1.2 million in 2011. IHS expects 1.35 million units to be exported in 2013. China, however, will be a source of vulnerability for exports, because IHS believes the growth in overall Chinese auto demand could be weaker than industry expectations of 5 to 8 percent this year.
Some U.S. auto ports, especially on the East Coast, are seeing a boom in the auto trade. “We had our best year ever in autos last year,” said Jim White, executive director of the Maryland Port Administration. “We jumped to the No. 1 auto port in the country.” Baltimore’s auto volume grew 12.4 percent last year to 443,403 units, giving the port a 23 percent share of the total U.S. auto trade.
“What really pumped up our numbers was exports,” White said. The port’s auto exports jumped 32 percent year-over-year and accounted for more than a third of total throughput.
The port handled exports of 101,000 Chrysler cars, for example, compared with 16,000 during the recession year of 2009. “They are telling us we can expect about 146,000 car exports this year,” White said.
Unlike Ford or General Motors, which make cars for overseas markets in those markets, Chrysler makes most of its cars in the U.S. for the domestic and overseas markets. It has started to shift some production to Mexico, however, where it exports through the ports of Altamira on the east coast and Mazatlan on the west coast.
Baltimore’s auto import volumes jumped 32 percent in 2011 compared to 2010, partly a result of increased imports of BMWs and Mercedes Benzes, both of which are handled by the Mercedes Benz auto-processing facility under an arrangement between the two competitors that began last year.
West Coast ports, the primary gateways for Asian imports, are still recovering from the tsunami in Japan and floods in Thailand. “We really haven’t seen numbers that are back to what we would consider normal,” said Josh Thomas, a spokesman for the Port of Portland, one of the two largest West Coast auto ports along with Long Beach. “We are now seeing a rebound as suppliers are looking to replenish the ocean inventories.”
In the first two months of this year, auto imports increased 35 percent year-over-year. The problems caused by the disruptions of parts supplies last year continued through most of 2011. The volume of autos handled by Portland dropped 11.5 percent to 234,048 vehicles, a little more than half the port’s average annual volume before the 2009 recession.
In January, Portland started to handle exports of nine Ford models to South Korea. It is handling exports of cars made at Ford plants in Chicago, Kansas City, two locations in Michigan, Ontario, and Hermosillo, Mexico.
“Ford is our only export client at this point,” Thomas said. “We’re hoping that business will grow.”