The Automotive Industry

The Automotive industry has come to signify much more than automobiles. For many consumers, the looks and values of an automobile matter as much as its performance. Vehicles have also become indicators of environmental awareness, with the consumers owning hybrid vehicles, for example, viewed as responsible citizens.

The automotive industry makes a broad range of vehicles from two wheelers to passenger cars and multi-utility vehicles to commercial vehicles. In terms of volumes and values, passenger cars, two-wheelers and commercial vehicles dominate other segments in the automotive industry.

The transformation of the under-the-hood technology has been dramatic in recent years. The technological advances in the automotive industry have made automobiles powerful, efficient and comfortable.

The automotive market size generally reflects the size of economy; thus developed countries such as the USA, Japan and Germany figure among the leading markets in the automotive industry.

The automotive industry is dominated by a handful of players due to technological and capital barriers. The vehicle manufacturers from the USA, Japan, Europe and South Korea account for a majority of the global vehicle sales. The leading vehicle manufacturers in the automotive industry include:

• General Motors,
• Ford,
• DaimlerChrysler,
• Toyota,
• Honda,
• Hyundai,
• PSA,
• Renault-Nissan
• Volkswagen.

The automotive industry has undergone considerable change over the years. The American vehicle manufacturers, who dominated the automotive industry for much of twentieth century, conceded technological leadership to the Japanese vehicle manufacturers, only to make a strong comeback in recent years. The Europeans and Koreans are also beginning to own a larger share of the global market.

Challenges in the automotive industry

Currently the global automotive industry is suffering from over capacity, and major American vehicle manufacturers are not doing as well as they used too. The demand for vehicles is sluggish in major developed markets, but robust in India and China. The demand for commercial vehicles, however, remains strong across the globe.

With demand remaining sluggish in the USA and other major European markets, leading vehicle manufacturers within the automotive industry have been forced to cut production and announce job cuts. The Big Three (GM, Ford and Chrysler) are also grappling with huge pension and health care obligations. In addition, the biggest automotive market in the world, the USA, is witnessing a three-way battle between the Big Three, Japanese manufacturers and European producers.

In recent years, however, leading vehicle manufacturers such as General Motors and Toyota have been increasing their global footprint. Now most leading vehicle manufacturers have an exposure to fast-growing markets such as India and China.

The automotive industry and the environment

The automotive industry is under pressure on other fronts too. In recent years, vehicle manufacturers have been forced to pay more attention to fuel efficiency and emissions. These are big challenges in the US market where gas-guzzling sports-utility vehicles are popular.

Most global vehicle manufacturers in the automotive industry have responded to cost pressures by cutting down the number of platforms and imposing price cuts on automotive suppliers, resulting in several units being forced into bankruptcy.

In the coming months, the automotive industry will be dependent upon the state of the global economy. Already several US vehicle manufacturers have slipped into the red in the first quarter and the crisis gripping the global automotive industry could worsen if the anticipated slowdown of global economy is greater than expected due to higher energy prices.

The global automotive industry is no stranger to adversity. It has overcome many difficulties in the past and will continue to do so.

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