About the industry
In an overview of the automotive industry, Investopedia outlines the various components that make up the industry. The summary explains, “The auto manufacturing industry is considered to be highly capital and labor intensive. The major costs for producing and selling automobiles include:
Labor: While machines and robots are playing a greater role in manufacturing vehicles, there are still substantial labor costs in designing and engineering automobiles.
Materials: Everything from steel, aluminum, dashboards, seats, tires, etc. are purchased from suppliers.
Advertising: Each year automakers spend billions on print and broadcast advertising; furthermore, they spend large amounts of money on market research to anticipate consumer trends and preferences.
The auto market is thought to be made primarily of automakers, but auto parts makes up another lucrative sector of the market. The major areas of auto parts manufacturing are:
Original Equipment Manufacturers (OEMs): The big auto manufacturers do produce some of their own parts, but they can’t produce every part and component that goes into a new vehicle. Companies in this industry manufacture everything from door handles to seats.
Replacement Parts Production and Distribution: These are the parts that are replaced after the purchase of a vehicle. Air filters, oil filers and replacement lights are examples of products from this area of the sector.
Rubber Fabrication: This includes everything from tires, hoses, belts, etc.
In the auto industry, a large proportion of revenue comes from selling automobiles. The parts market, however, is even more lucrative. For example, a new car might cost $18,000 to buy, but if you bought, from the automaker, all the parts needed to construct that car, it would cost 300-400% more. Over and above the labor and material costs we mentioned above, there are other developments in the automobile industry that you must consider when analyzing an automobile company. Globalization, the tendency of world investment and businesses to move from national and domestic markets to a worldwide environment, is a huge factor affecting the auto market. More than ever, it is becoming easier for foreign automakers to enter the North American market.”
Forbes wrote about 5 big consumer trends in the automotive industry we can expect to see in 2015. These changing trends are important for executives to watch for, track, and analyze in order to stay competitive and profitable. Forbes writes, “After the best sales year since 2006, the U.S. auto industry is looking forward to a strong 2015, with sales likely to top 17 million units. A better economy, rising consumer confidence and easier access to credit have created ideal market conditions for carmakers and put the 2009 crisis firmly in the rearview mirror. But there are other industry trends that will drive customers into dealer showrooms in the coming year. Here’s a look at five big ones.
1. Cute UTEs: Car-based sport utilities have been popular for several years, but in 2015, look for a new twist: more subcompact SUVs like the Jeep Renegade, Honda HR-V and Mazda MX-3. These tiny but flexible crossovers are targeted at young, urban explorers. Demand among U.S. buyers is still uncertain, but these compact SUVs have huge global potential.
2. Truckin’: Competition in the pickup truck segment has never been more intense, with the three big U.S. automakers vying for supremacy in both performance and fuel economy. The Japanese aren’t giving up, either, with both Toyota and Nissan launching new pickups in 2015.
3. Wired Up: Besides styling and fuel economy, in-car technology is becoming a major buying consideration. After early misses, automakers are redesigning their infotainment systems to make them safer and easier to use. Ford, an early leader, for instance, is dumping its MyFordTouch system in favor of easier-to-use technology.
4. Fast Cars: At a national average of $2.24 per gallon, gas prices aren’t the concern they used to be, which is why sales of high-performance sports cars like the new Acura NSX and Cadillac CTS-V should pop this year.
5. Green Machines: Even with falling gas prices, carmakers are experimenting with new powertrain technologies to meet tough new laws on fuel economy. Honda will show a new FCV fuel-cell concept at the Detroit auto show in January, while Toyota will start selling its Mirai fuel cell vehicle in California in the fall.”
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