Automobile Industry Hassan, Salman & Ahmad BA 630 - Spring 19 Introduction Truck Classification by the U.S. Department of Transportation’s GVWR and Vehicle Inventory Use Service (VIUS) Categories
Class Weight Body Style Duty
Class 1 6,000 lbs & less Minivan Cargo Van SUV Pickup truck Light Duty Full-Size Class 2 6,0001 to 10,000 lbs Van Cargo Van Step Van Pickup Heavy-duty Medium Class 3 10,001 to 14,000 lbs Walk-in Box Truck City Delivery Pickup Duty
Source: energy.gov Producer's perspective
Item Car Truck
Frame Unibody Body On Frame
Body small big
Engine Light duty Heavy duty
Channel of distribution Car dealers Truck dealers
Manufacture More automation Less automation Customer’s perspective
Price Economy luxury Sports cars
Capacity Mid size Full size Pickup Truck Semi Truck Heavy Truck Med Truck
Body Style Sedan Hatchback SUV Wagon Minivan
Types of cars appropriate for passengers Geographic Scope
Sales of passenger cars in selected countries Cars Imports by Country in 2018 worldwide from 2005 to 2017 (in million units) Country value worth of cars of total cars imports
United States $178.5 billion 23.10%
Germany $61.5 billion 8%
China $49.6 billion 6.40%
United Kingdom $43.9 billion 5.70%
Car Exports by Country in 2018
Country value worth of cars of total cars exports
Germany $154.7 billion 20.80%
Japan $99.1 billion 13.30%
United States $51.4 billion 6.90%
Mexico $49.4 billion 6.60%
Source: oica.net; worldstopexports.com Our Definition for The Industry
Manufacturing passenger automobile or light duty trucks including transmission, engine, and bodies.
copyright for frooition.com Compare to other Definitions
Closer to our definition
The most important classes of road vehicles include cars, commercial Statista vehicles and two-wheelers.
NAICS ISIC Broader than our definition Old definition and we disagree with it Manufacture of motor vehicles, trailers Manufacturing truck, automobile and utility trailers, and semi-trailers for transporting truck trailer chassis, detachable trailer bodies, and passengers or freight. detachable trailer chassis. The value Chain
Tier 1 suppliers: gearbox Tier 2 suppliers: pump units Tier 3-x suppliers: brackets, seals
Source:edibasics.com Major Firms
New Entrants Google Buyers Bommarito Automotive Group Apple CarMAX Bosch Individuals
Suppliers Substitute/ complements Magna International Uber Rivalry Lear Lyft Ford/ Toyota Adient Used Car. Volkswagen/ GMC BMW/ Mercedes Rivalry Concentration Globally Global automotive market share in 2018, by brand 28% Concentration Rate
Conclusion: • Low concentration. • High rivalry.
Source: Focus2mov.com Concentration in the U.S Market share held by selected automobile manufacturers in the U.S in 2018 Market share 59% Concentration Rate
Conclusion: ● Medium concentration. ● Medium rivalry.
Source: GoodCarBadCar.net Growth Globally Worldwide car sales 1990-2019 (in million units)
Conclusion: • The industry growth is flat. • High rivalry.
Source: Scotiabank Growth in the U.S Passenger cars sales forecast ( in million units)
Conclusion: • The industry has a slow growth. • High rivalry.
Source: statista sarvey. Electric Vehicles Market Share
Worldwide plug-in electric vehicle sales in 2018, by model
(in 1,000 units) 68%
Concentration Rate
Conclusion: ● High concentration. ● Low rivalry.
Source: ev-volumes Electric Vehicles Growth Globally Global Monthly PLUG-IN sales
Conclusion: • The industry growth is going up. • Low rivalry.
Source: ev-volumes Fixed and Marginal costs
● Same for one unit or more. Fixed Cost ● Expenses goes down when producing the second generation.
Raw materials and 57% the prices of auto parts of the total price
R&D, engineering, 16% Variable cost and running the facilities of the total price Conclusion: Average advertising charges $1,091 • Relatively low fixed cost. for each unit • High Variable cost. • Low Rivalry.
Source: carfromjapan.com Product Differentiation
Average Customer Manufacturer Reliability Safety Cost Service American $29,347 1.40 83 50% Honda Ford Motor $40,256 1.52 84 45% Company
Hyundai - Kia $24,705 1.24 80 59%
Subaru $29,636 1.67 84 65% Conclusion: Toyota Motor $34,143 0.99 85 77% Company ● 91% of companies differentiate
Volkswagen based on features and product $42,322 1.57 82 47% Group excellence.
● Low Rivalry. Sources: Kelley Blue Book, Consumer Report Cost differences among firms
Ievies a 2.5% tariff on USA European auto imports.
Conclusion: The European Imposes a 10% duty on ● In the US: High Rivalry. Union the US auto imports. ● In the European Union: Low Rivalry.
Source: dw.com Suppliers Suppliers Concentration Tires 45% Concentration Rate 28% CR for Car Industry
Conclusion: Suppliers have high power.
Source: Tire Business Suppliers Concentration Steel 15% Concentration Rate 28% CR for Car Industry
Conclusion: Suppliers have low power.
Source: World Steel Association Suppliers Concentration Electronics as a whole industry 44% Concentration Rate 28% CR for Car Industry
Conclusion: Suppliers have high power.
Source: Strategy Analytics; Infineon Suppliers Concentration Electronics (Automotive Semiconductor) 45% Concentration Rate 28% CR for Car Industry
Conclusion: Suppliers have high power.
Source: Strategy Analytics; Infineon Suppliers Concentration Glass 39% Concentration Rate 28% CR for Car Industry
Conclusion: Suppliers have medium power.
Source: Cision PR Newswire, Ci Suppliers Dependency on Automobile Industry Tires
Global car sales in 2018 79 million units 24%
5 pieces each car 395 million tires
Global tires sales in 2018 1.624 billion tires
Conclusion: Tire suppliers have high power.
Source:Bryan Garnier & Co & Scotiabankr Suppliers Dependency on Automobile Industry Steel
Global steel production in 2018 1,808,6 (MT) million 4%
Steel for each car 900 kg
Global automobile sales in 2018 79 million units
Total steel for automobile in 711 (MT) million 2018 Conclusion: Steel suppliers have high power.
Source: worldsteel.org . Suppliers Dependency on Automobile Industry Glass
Global production of flat glass in 10 billion sq.m 2018 5%
Global OEM automotive glass market 528 million sq.m in 2018
Conclusion: Glass suppliers have high power.
Source: freedoniagroup & prnewswire Suppliers Dependency on Automobile Industry Electronics
Bosch's revenue in 2017 $89.30 billion 53% Bosch's global sales of OEM $47.40 billion automotive parts in 2017
Conclusion: Electronic suppliers have low power.
Source: Berylls Strategy Advisors & Bosch Suppliers product as % of total spending for industry Steel
The global steel production reached 1,808.6 million tons (Mt)
Price of a ton of steel in 2018 $608.77
Percentage of steel the automobile Automobile industry worldwide 15% industry used paid $2,031 per car for steel in 2018. The total amount that the automobile $143,132,784,860 industry paid to buy steel
Conclusion: Suppliers have high power.
Source: worldsteel.org Suppliers product as % of total spending for industry Tires
The global tire market reached a volume of in 3.1 billion units 2018
The global tire industry is valued in 2018 $229 billion
12.3% Automobile industry worldwide paid Percentage of tires the automobile industry used $400 per car for Tires in 2018. The total amount that the automobile industry $28,188,000,000 paid to buy tires
Conclusion: Suppliers have high power.
Source:expertmarketresearch.com Suppliers product as % of total spending for industry Electronics
Automobile industry worldwide paid 35% of a car's cost for electronics in 2018.
Conclusion: Suppliers have high power.
*
Source: Strategy Analytics Relative cost of suppliers product for industry The Labor
Conclusion: Suppliers have low power in OECD countries.
Source:autoalliance.org Buyers Buyers Concentration New-vehicle Retail 17%
Concentration Rate 28% CR for Car Industry
Conclusion: Buyers have low power.
Source: Cision PR Newswire, Ci Buyers Concentration Fleet-car 14%
Concentration Rate 28% CR for Car Industry
Conclusion: Buyers have low power.
Source: Cautomotive-fleet & autonews Dealership sources of income
Conclusion: ● 74% of Dealers are dependent on new cars. ● Dealers have low power.
Source: Edmunds Industry product as % of total spending for consumers
$48,251.57 Average family income
$35,258 Average new car price
Average age of a vehicle 11.6 years
Total Spending for a car per a year for an %6.30 average family income Conclusion: Dealers have high power.
Source: KBB, SSA & IHS Markit Brand Loyalty
Conclusion: ● High brand loyalty. ● Dealers have high power.
Source:Edmunds Industry dependence on intermediary
In the United States in 2018
The number of total cars sold 17.3 million
The number of cars sold by 17.22 million dealerships Conclusion: Buyers have high power.
Source:nada.org Substitutes Price Comparison
Ownership of a vehicle vs. Ride Sharing ● Average cost per mile
Car Ownership 60.8 Cents Conclusion:
Ride Sharing 2 Dollars ● Ride Sharing is a low threat
● Annual Cost for owning and operating a vehicle is $9,122 for ● Ride Sharing is a good 15,000 mile. substitute for people ● Breakup point for ride sharing is 4,561 mile/year. who can drive less than 4,561 mile/year
Source: AAA North West Price Comparison
Ownership Cost New Cars vs. Used Cars
Comparison Honda Accord 2019 Honda Accord 2016
True Cost To Own $33,296 $32,495
Total Cash Price $25,140 $17,303
* Based on a 5-year estimate with 15,000 miles driven per year. Conclusion: Used Car is a low threat
Source: Edmunds Price Comparison Ownership cost: 5 years breakdown
Honda Accord 2019 vs. Honda Accord 2016
Source: Edmunds Performance Comparison
New Cars vs. Used Cars
New car Used car Reliability Higher Lower Warranty Yes No Safety Higher Lower
Conclusion: New Cars have better performance
Source: diversifiedfinances Ridehailing Number of vehicles in the global ridehailing fleet from 2015 to 2025 (in million units)
Conclusion: Ridehailing has positive impacts on the industry.
Source: Center for Automotive Research Used Car Impacts Number of new and used light vehicle sales in the United States from 2000 to 2018 (in millions)
Conclusion: Used cars impact the industry negatively.
Source: Automotive News; BEA New Entrance Economies of scale
Toyota in North America 2017 (Traditional cars)
Cost to build a factory 1 Billion Dollars
Number of Factories 14 plants
Number of vehicle production 1,983,723
Number of engin production 1,821,233
Number of vehicle models 13 Conclusion: Number of dealers Nearly 1500 Threat of new entry is low
Source: TOYOTA Brand Loyalty Traditional Cars
Conclusion: ● High brand loyalty.
Source:Edmunds Brand loyalty Electric Cars Apple's global brand value from 2006 to 2018
Conclusion: Apple's Project Titan may have high power in the future.
Source:Kantar Millward Brown; bbc.com Brand loyalty Electric Cars Google's global brand value from 2006 to 2018
Conclusion: Google’s Project Waymo may have high power in the future.
Source:Kantar Millward Brown; Access to distribution channels Electric Cars Vehicle deliveries of Tesla by quarter 2019
Tesla’s sales model have succeeded without car dealers by sale more than 500 thousand cars.
Conclusion: Threat of new entry to EV is high since there is a way to sell the cars online.
Source:Tesla Access to raw materials Electric Cars Rare Earths Production 2018
Conclusion: Access to raw materials is a potential issue for electric vehicles manufacturers out of China
Source:USGS Government Regulations
- Global Safety Regulations: Safety issues are always at the center of attention when it comes to new regulations.
- Automotive Environmental Regulations: Governments have been imposing stringent environmental regulations on Original Equipment Manufacturers to control CO2 emissions. Electric cars reduce emissions, so they take advantage of Conclusion: Environmental Regulations because it is environmentally friendly. The level of Regulation is Medium and the trend is increasing
Source: IBISWorld Conclusion
New Entrants Buyers Low Threat Medium Power
Substitute/ complements Suppliers Rivalry Low Medium Threat Fairly High Power Low Medium Thank You Sources 1. https://prd-wret.s3-us-west-2.amazonaws.com/assets/palladium/production/atoms/files/mcs-2019-raree.pdf 2. https://corporatenews.pressroom.toyota.com/releases/toyota+production+north+america+nearly+two+million+in+2017.htm 3. https://corporatenews.pressroom.toyota.com/releases/toyota+production+north+america+nearly+two+million+in+2017.htm 4. https://newsroom.aaa.com/tag/driving-cost-per-mile/ 5. https://medium.com/@braydeng/2018-was-a-huge-year-for-electric-vehicles-in-charts-b6aad055bdff 6. https://ezproxy.wou.edu:2519/statistics/783609/worldwide-electronic-system-market-share-by-category/ 7. https://www.autonews.com/assets/PDF/CA98762313.PDF 8. https://www.autonews.com/assets/PDF/CA109608327.PDF 9. https://www.automotive-fleet.com/143685/commercial-fleet-sales-increase-1-4-in-2017 10. http://www.ev-volumes.com/country/total-world-plug-in-vehicle-volumes/ 11. https://www.statista.com/chart/13075/most-important-factors-when-buying-a-car/ 12. http://www.cargroup.org/wp-content/uploads/2017/02/The-Impact-of-New-Mobility-Services-on-the-Automotive-Industry.pdf 13. https://www.edibasics.com/edi-by-industry/the-automotive-industry/ 14. https://www.reportlinker.com/automotive/trends/production/environmental-and-safety-regulations.html 15. https://www.energy.gov/eere/electricvehicles/saving-fuel-and-vehicle-costs 16. https://www.edmunds.com/industry/press/new-auto-sales-on-track-for-near-record-year-in-2018-edmunds-forecasts.html 17. https://www.india-briefing.com/news/labor-market-india-structure-costs-18264.html/ 18. https://www.statista.com/statistics/277931/automotive-electronics-cost-as-a-share-of-total-car-cost-worldwide/ 19. https://www.expertmarketresearch.com/pressrelease/global-tire-market 20. https://www.worldsteel.org/media-centre/press-releases/2019/Global-crude-steel-output-increases-by-4.6--in-2018.html Sources Cont.
1. https://tradingeconomics.com/commodity/steel 2. https://www.dw.com/en/german-car-industry-warns-us-over-auto-tariffs/a-47556664 3. http://focus2move.com/world-cars-brand-ranking/ 4. https://www.energy.gov/sites/prod/files/2014/03/f13/wr_trucks_hdvehicles.pdf 5. http://www.oica.net/category/sales-statistics/ 6. http://www.goodcarbadcar.net/2019/01/u-s-auto-sales-brand-rankings-december-2018-ytd/ 7. https://www.scotiabank.com/content/dam/scotiabank/sub-brands/scotiabank-economics/english/documents/global-auto- report/GAR_2019-01-30.pdf 8. https://ezproxy.wou.edu:2519/outlook/1000000/109/passenger-cars/united-states 9. https://www.kbb.com/ 10. https://www.consumerreports.org/cro/index.htm 11. https://www.edmunds.com/car-buying/where-does-the-car-dealer-make-money.html 12. https://markets.businessinsider.com/news/stocks/tire-market-global-industry-trends-share-size-growth-opportunity-and- forecast-2017-2022-1001813368 13. https://www.worldsteel.org/en/dam/jcr:1a0978ce-d387-4ce9-8d1b- 5f929f343ac1/2017_2016+top+steel+producers_Extended+list.pdf 14. https://www.infineon.com/dgdl/IFX_2018_Q3_web_EN.pdf?fileId=5546d4615f9640f0015fb9c63a36005b