Leading independent forecasters expect total NAFTA light vehicle production volumes in 2004 to be flat – or slightly down – compared with last year.

PwC Autofacts, for example, is looking at production of 15.7 million units in 2004, compared with 15.8 million in 2003.

CSM Worldwide agrees. “We’re looking for a rate of about 15.8-15.9 million units” says the firm’s vice president of global forecast services, Michael Robinet.

Last year the total was 15.9 million units.

“It was expected at one point that the year might be slightly better” said Robinet, but some of the domestic brands have had difficulty shifting inventory in the first four months of the year. The forecasters expect a cut in production in the second half of the year to bring inventory back to more normal levels.

Global Insight’s production analyst Catherine Madden has not gone as far in reducing her forecast, but it has come down over the last few months.

Global Insight has lowered its forecast for the full year from 16.3 million light vehicles to 16 million in NAFTA as a whole. Inventory was running 10 days above normal rates at the end of April, said Madden.

But she remains optimistic on the economy as a whole, and that drives demand. Madden sees employment figures as the key factor for volumes.

“The economy needs to keep adding 100,000 jobs a month if demand is not to stall,” she says.

Consumer confidence has bounced around a lot, she says, and that has a big effect on sales.

Global Insight has also not changed its production outlook much in the face of the mild acceleration in interest rate rises. Global Insight expects the Fed’s next upward move in June rather than August.

And the uptick in production has only been postponed, says Global Insight.

This year’s slight rise has been pushed forward into 2005. Global Insight is looking for a rise of 3-3.5% in production in 2005, driven by the ramp-up of production of new models (from Ford and Volkswagen) late in calendar 2004.

Oil price rises have little effect

The recent spike in fuel prices, even if sustained, is unlikely to have an effect on total industry volumes, according to the forecasters – even before the slide in prices over the last few days.

Robinet at CSM says that fuel costs are such a low percentage of ownership costs that it would take a petrol price rise to around $US3 a gallon to make much of in a impact on total industry volumes. Regular unleaded petrol currently averages around $2.05 a gallon.

He also sees few changes in market shares as a result of the higher petrol prices.

But other analysts say that they are seeing a possible shift in the mix of vehicles offered by OEMs to smaller vehicles.

It is also “a bit of a catalyst providing encouragement to manufacturers to look at powertrain technology issues” says PWC Autofacts North America lead analyst Ryan Robinson.