U.S. Automotive Sector Begins 2013 with $1.2 Billion in Planned Construction Starts

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Researched by Industrial Info Resources (Sugar Land, Texas)--Worries about the economic effects of the "fiscal cliff" have caused some businesses to pull back on spending and expanding. Spending on capital goods, excluding defense and aircraft purchases, fell sharply throughout 2012, with only a slight rebound due to a pending tax break for business purchases. Nevertheless, the U.S. automotive sector is expected to see tremendous growth in 2013. Industrial Info is currently tracking $1.2 billion in new construction starts scheduled to begin in the sector this year.

Despite these economic concerns, U.S. automotive sales have increased significantly, with 2012's final numbers nearing the 15 million-unit mark, which makes last year the sector's best for sales since 2007. A number of factors drove increased automotive sales in 2012, primarily easier access to credit, rising home prices and pent-up demand. Higher home prices can help U.S. car shoppers feel wealthier and translate to higher auto sales. Overall, sales in 2012 increased more than 13% over the final sales figures of only a year before.

The $1.2 billion in new construction starts scheduled to begin this year in the sector are expected to take place in several key regions of the country. The Great Lakes region, the home of the automobile and arguably the region with the highest concentration of automotive manufacturing, is currently expected to see the lion's share of the proposed project activity. Overall, 100 capital and maintenance projects worth more than $500 million are slated to call the Great Lakes region home in 2013. This is a decent start for the new year, but slower than the same period in previous years when it came to capital spending. This slow start can be attributed to the presidential election last November and the difficult fiscal cliff fight after the election. Because of uncertainty about which party would claim the White House and the lack of significant action by the lame-duck Congress, companies were hesitant to plan at an accelerated pace until these issues were resolved.

The Southeast region of the U.S. is another area that is expected to see significant investment in 2013. Over the last 20 years, numerous automakers have opened assembly plants in this key region, which has drawn hundreds of tier suppliers to the area as well. For 2013, this region is currently scheduled to see more than 40 projects worth an estimated $387 million begin construction. Much like the Great lakes region, this initial spending total is low when compared to previous years for the same reasons listed above. However, it would not be shocking for the Southeast region to have begun construction on $1.5 billion to $2 billion worth of automotive related projects by the end of 2013.

Traditionally, the U.S. automotive sector sees its annual expenditures reach $8 billion to $10 billion. 2013 should be no exception once spending ramps up, now that some of the economic concerns companies had have been addressed by Congress. However, as Congress only partially solved the fiscal cliff problem, and another round of negotiations will take place at the end of March or the beginning of April, spending may get ramped up later in the year than usual. Hopefully, those in Washington, D.C. will put these issues at rest before the peak construction of summer and fall takes place. Look for automotive sales and spending to continue to improve in the U.S. throughout 2013.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, and eight offices outside of North America, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.