The Auto Industry

The auto industry is one of largest industries in the world. The auto industry can be broadly divided into three segments:

• vehicles
• components
• Accessories

The auto industry now makes a wide range of vehicles from two-wheelers to passenger cars to all-terrain vehicles. The manufacture of automotive components is also a significant part of the auto industry. Over the years, automotive companies have increased the percentage of components sourced from outside suppliers. The accessories have also become important with increasing number of consumers viewing automobiles as symbols of style and class.

The global auto industry is concentrated, with a majority of sales coming from top ten automotive companies. Major automotive companies are located in the USA, Europe and Japan. Leading automotive companies include General Motors, Ford, DaimlerChrysler, Toyota and Renault among others. Although global automotive companies operate across the globe, the majority of sales from the auto industry come from developed countries such as the USA, Germany, UK, France and Japan.

Sales in the Auto Industry

The traditional distribution channel of the auto industry includes automotive companies and authorised dealers. The vehicles go from the company to the authorised dealers for sale to consumers. The market for used cars is dominated by unauthorised dealers. The automotive industry companies have also merged into the sale of used or previously owned cars.

In recent times the Internet has emerged into an additional sales channel for vehicles. Although the purchase of an automobile can be complex decision, consumers have begun to buy automobiles on the Internet for two reasons: convenience and cost. The Internet facilitates the comparison of vehicles like no other medium. It is also convenient; a consumer can purchase a car from his desktop and have the vehicle delivered to his doorstep. The Internet also allows consumers to shop around for the best deal.

Competition has forced major automotive companies to offer steep price discounts to consumers. This has allowed many consumers to splurge on extras. Now optional items comprise a sizeable share of the total vehicle cost. Optional items include safety, comfort, communication and entertainment systems.

Financial services have become entwined with auto industry with increasing number of consumers buying vehicles on credit. The financing of automobiles has become a big business with both banks and automotive companies vying with each other to finance vehicles. All major automotive companies have now set up financial services divisions or companies to finance the purchases of their consumers. The financing of automobiles has become an important activity that helps to stimulate the demand for automobiles.

Similarly the oil prices also have an impact on the auto industry. The recent volatility in oil prices has forced consumers in developed countries to pay attention to fuel efficiency. The gas-guzzling pick-up trucks and sports-utility vehicles still sell in large numbers, but at the same time the sales of hybrid cars and compact cars are rising in developed markets.

Currently the global auto industry is passing through difficult times due to overcapacity and competition. Some of the leading automotive companies in the USA are also suffering from internal problems such as mounting pension and health care costs. Several automotive components manufacturers have already gone out of business. The coming few years will test the strength of the auto industry.