Overview of Automotive Industry

First automobile with petrol engine was built on 1885 and soon the figure for total cars in the world will be touching a mark of 1000 million cars and light trucks. This article presents a quick overview of what we mean with Automative Industry and how it started and what is the scale of this industry today.

The automotive industry designs, develops, manufactures, markets, and sells motor vehicles, and is one of the earth's most important economic sectors by revenue. The term automotive industry usually does not include industries dedicated to automobiles after delivery to the customer, such as repair shops and motor fuel filling stations.

The first practical automobile with a petrol engine was built by Karl Benz in 1885 in Mannheim, Germany. Benz was granted a patent for his automobile on 29 January 1886, and began the first production of automobiles in 1888, after Bertha Benz, his wife, had proved with the first long- distance trip in August 1888 (104 km from Mannheim to Pforzheim and back) that the horseless coach was absolutely suitable for daily use. Since 2008 a Bertha Benz Memorial Route commemorates this event.

Soon after, in 1889, Gottlieb Daimler and Wilhelm Maybach in Stuttgart designed a vehicle from scratch to be an automobile, rather than a horse-drawn carriage fitted with an engine. They also are usually credited as inventors of the first motorcycle, the Daimler Reitwagen, in 1885, but Italy's Enrico Bernardi, of the University of Padua, in 1882, patented a 0.024 horsepower (17.9 W) 122 cc (7.4 cu in) one-cylinder petrol motor, fitting it into his son's tricycle, making it at least a candidate for the first automobile, and first motorcycle.

Until 2005, the U.S.A. led the world in total automobile production. In 1929 before the Great Depression, the world had 32,028,500 automobiles in use, and the US automobile industry produced over 90% of them. At that time the U.S. had one car per 4.87 persons. In 2006, Japan narrowly passed the U.S. in production and held this rank until 2009, when China took the top spot with 13.8 million units. By producing 18.3 million units in 2010, China produced nearly twice the number of second place Japan (9.6 million units), with the U.S. in third place with 7.8 million units.

Around the world, there were about 806 million cars and light trucks on the road in 2007, consuming over 260 billion US gallons (980,000,000 m3) of gasoline and diesel fuel yearly. The automobile is a primary mode of transportation for many developed economies. The Detroit branch of Boston Consulting Group predicts that, by 2014, one-third of world demand will be in the four BRIC markets (Brazil, Russia, India and China). Other potentially powerful automotive markets are Iran and Indonesia. Emerging auto markets already buy more cars than established markets. According to a J.D. Power study, emerging markets accounted for 51 percent of the global light-vehicle sales in 2010. The study expects this trend to accelerate. India is home to a vibrant automobile of more than 40 million vehicles. It has been one of the few countries worldwide which saw growing passenger car sales during the recession of the past two years. It is believed this upward trend will be sustained in the foreseeable future due to a strong domestic market and increased thrust on exports. The Indian economy has grown at an average rate of around 9 percent over the past five years and is expected to continue this growth in the medium term. This is predicted to drive an increase in the percentage of the Indian population able to afford vehicles. India’s car per capita ratio (expressed in cars per 1,000 population) is currently among the lowest in the world’s top 10 auto markets. The twin phenomena of low car penetration and rising incomes, when combined with increasing affordability of cars, are expected to contribute to an increase in India’s automobile demand.

Next >- Learn more at www.technofunc.com. Your online source for free professional tutorials. ry of Automotive Industry

Study of the automotive industry is inherently interesting: it is massive, it is competitive, and it is just few years older than a century. It is expected to undergo major changes in recent times due to the impact of globalization, increased regulations because of environmental concerns and rising fossil fuel prices due to decreasing oil reserves.

The evolution of the automotive industry has been influenced by various innovations in fuels, vehicle components, societal infrastructure, and manufacturing practices, as well as changes in markets, suppliers and business structures.

Year 1600:

Some historians cite examples as early as the year 1600 of sail-mounted carriages as the first vehicles to be propelled by something other than animals or humans. However, it is believed by most historians that the key starting point for the automobile was the development of the engine.

First Fuel Engine in 1876:

The engine was developed as a result of discovering new energy carrying mediums, such as steam in the 1700s, and new fuels, such as gas and gasoline in the 1800s. Shortly after the invention of the 4-stroke internal combustion gasoline-fueled engine in 1876, the development of the first motor vehicles and establishment of first automotive firms in Europe and America occurred.

First Practical Automobile in 1885:

The first practical automobile with a petrol engine was built by Karl Benz in 1885 in Mannheim, Germany. Benz was granted a patent for his automobile on 29 January 1886, and began the first production of automobiles in 1888, after Bertha Benz, his wife, had proved with the first long- distance trip in August 1888 (104 km (65 mi) from Mannheim to Pforzheim and back) that the horseless coach was absolutely suitable for daily use. Since 2008 a Bertha Benz Memorial Route commemorates this event.

Birth of Automotive Industry (1890 – 1910):

During the 1890s and early 1900s, developments of other technologies, such as the steering wheel and floor-mounted accelerator, sped up the development of the automotive industry by making vehicles easier to use. Almost simultaneously, in America, the societal infrastructure that would provide fertile ground for the proliferation of automobiles was being set. Driver’s licenses were issued, service stations were opened, and car sales with loan structures were instituted. Famous vehicle models such as Ford’s Model T were developed during these times and, by 1906, car designs began abandoning the carriage look and taking on a more car like appearance.

Early Automotive Infrastructure Put in Place (1910-1920):

During the 1910s, the development of technologies and societal infrastructure continued in addition to new manufacturing practices and business strategies. Traffic lights started appearing in the U.S. and thousands of road signs were posted by B. F. Goodrich on over 100,000 miles of U.S. roads. Henry Ford’s famous assembly line was launched in 1913, which allowed vehicles to be mass produced and thus achieved economies of scale. Ford also introduced the concept of using interchangeable and standard parts to further enable the mass production process. Automakers also started to merge with other companies (e.g., GM acquired Chevrolet) and to expand to other markets (e.g., GM of Canada).

Era of Mass Production and Variety (1920-1930):

In the 1920s, the development of infrastructure, adoption of new manufacturing practices, and the merging of companies continued (e.g., Benz and Daimler, Chrysler and Dodge, Ford and Lincoln). In the U.S., the Bureau of Public Roads and the enactment of the Kahn-Wadsworth Bill helped facilitate road-building projects and develop a national road system. In manufacturing, mass production methods became better established, which led to the availability of a wide range of satisfactory cars to the public. While Ford had focused on a single model, GM adopted a new production strategy for providing greater product variety, which helped the company increase their market share by snatching it from Ford.

Decade of New Market Players (1930-1940):

In the 1930s, several new vehicle brands were developed (e.g., Ford Mercury, Lincoln Continental, Volkswagen) and trends in vehicle consumer preferences were established that differentiated the American and European market. In the U.S. market, consumers preferred luxurious and powerful cars, whereas in Europe consumers preferred smaller and low-priced cars. Also during this time, GM’s product variety strategy continued to give them a competitive advantage over Ford, allowing GM to continue increasing their market share while Ford kept losing theirs.

The End of World War II (1940-1950): Many European and Asian-Pacific countries led to the development of new production and business strategies. In the 1940s, during World War II (WWII), automotive factories were used to make military vehicles and weapons, thus halting civilian vehicle production. After WWII, the economies of most European and some Asian-pacific countries, such as Japan, were decimated; this required the development of new production and business strategies such as those of Toyota, which began to develop Just in Time (JIT) manufacturing. Most of the first models produced were similar to the pre-war designs since it took some time for the plants to revamp their operations to make new designs and models. Using this strategy there were able to improve return on investment by reducing in-process inventory and lowering carrying costs.

Era of Technological Innovations (1950-1960):

In the 1950s and 1960s, more technological innovations, brought many changes in the automotive industry. Some new concepts were, new look and feel of the automobiles, fiberglass bodies, higher compression ratio fuels, vehicle comfort, look and feel, emerging safety and environmental regulations, vehicle speed limits, front seat belts, and, heating and ventilation equipment.

Era of Fuel Efficient Cars (1970-1980):

The 1970s were marked by stricter environmental regulations and the oil crisis of the early 70s, which led to the development of low emission vehicle technologies, such as catalytic converters. Foreign cars like the Japanese Honda Civic started appearing in the U.S. market. Consumer interest in fuel efficient vehicles was increasing due to high oil and fuel prices. Vehicles made in Asia that were highly fuel efficient began increasing their market share in developed markets. This decade also marked the beginning of Lean production by Japanese automakers.

Start of Globalization (1980 – 1990):

In this decade affordable, fuel-efficient vehicles continued to increase their market share. The U.S. automotive industry began losing market share to the higher quality, affordable, and fuel efficient cars from Japanese automakers. Due to this, vehicle manufacturing became more globalized as auto manufacturers started assembling vehicles from around the world. This trend was accelerated in the 1990s with the construction of overseas facilities and mergers between multinational automakers. This global expansion gave automakers a greater capacity to infiltrate new markets quickly and at lower costs.

Variety & Empowerment of Consumer (1990 – 2000):

Influence of globalization continued in the 1990s. Huge overseas assembly plants were built and many mergers took place between large, multinational automakers. This resulted in a greater variety of products in the marketplace available for consumers to choose from and increased competition among the automotive players. Increasing sophistication and empowerment of the consumer led to new and more specialized markets with diverse consumer base such as Southeast Asia and Latin America. This further fuelled global alliances and commercial strategic partnerships with foreign automakers.

Era of Financial Troubles (2000 – Present): This decade has been tumultuous for automobile and light duty motor vehicle manufacturers. Industry revenue growth was very low compared to past and skyrocketing fuel prices and growing environmental concerns shifted consumers' preferences away from fuel-guzzling pickup trucks to smaller, more fuel-efficient cars. The global economic crisis that began in 2007, led to financial troubles for many of the world's largest automakers and rippled through other countries around the globe, causing unemployment to rise and wealth to dive. General Motors was hit particularly hard, filing for Chapter 11 bankruptcy in June 2009. Due to lower disposable income and growing pessimism about the future, demand for cars dropped. Motor vehicle sales crashed in 2008 and 2009, although they have recovered strongly since.

< Prev Next >- Learn more at www.technofunc.com. Your online source for free professional tutorials. Automotive Industry: Industry Sectors

In this article we will discuss the business sectors of the automotive industry. We will understand the major sectors in the automotive industry and the role they play and their impact on the industry. The major business sectors of automotive industry are suppliers, auto- manufacturers and auto dealerships.

Pillars of Automotive Industry:

The automotive industry can be divided into three business sectors that form the pillars of the industry. The three business sectors are:

Car and Automobile Manufacturers:

Companies in this industry manufacture chassis for automobiles and light duty motor vehicles and assemble final automobiles and light duty motor vehicles. These vehicles include passenger cars, pickup trucks, sports utility vehicles (SUVs), crossover utility vehicles, people movers and vans. Many parts are acquired from many different suppliers and finally assembled by the Auto Manufacturer. They use these parts to build vehicles and assembled vehicle is sold under their brand names. Auto manufacturers produce and sell light-duty vehicles, such as passenger cars, vans, and pickup trucks. They also sell heavy-duty vehicles, such as trucks, transit buses, school buses, and military vehicles.

Industry Products:

• Cars

• Pickup trucks and SUVs • Vans

• Trucks

• Transit Buses

• School Buses

• Military Vehicles

Industry Activities:

• Manufacturing passenger cars, light trucks, sport utility vehicles and vans

• Manufacturing chassis for passenger cars, light and utility trucks, and vans

• Manufacturing electric automobiles for highway use

• Hearses assembling on chassis of own

Auto Parts and Accessories Manufacturers:

Companies in this industry manufacture motor vehicle parts and accessories other than engines, engines parts, batteries, tires, bodies and chassis. Motor vehicle assembling is not included in this industry. Manufacturers typically supply parts and accessories to original equipment manufacturers (OEM) for use in the manufacturing of complete motor vehicles or for replacement parts in OEM dealerships. They also supply parts to the aftermarket.

Suppliers form part of a highly complex supply chain that transforms raw materials and components into ready-made auto parts that are then delivered to auto manufacturers. The supplier business sector also includes aftermarket parts, replacement parts, and rubber fabrication companies.

Industry Products:

• Electrical and electronic components

• Steering and suspension

• Brake systems

• Transmission and power train

• Seating and interior trim

• Metal stamping • Air conditioning, air bag, wheel and all other parts

Industry Activities:

• Motor vehicle electrical and electronic part

• Motor vehicle steering and suspension part

• Motor vehicle brake system

• Motor vehicle transmission and power train part

• Motor vehicle seating and interior trim part

• Motor vehicle part metal stamping

Car & Automobile Sales / Auto Dealerships:

This industry is involved in the retailing of new and used motor vehicles mainly through dealerships, commission agents and car auctions. Products sold in this industry include: passenger cars, SUVs and light trucks, heavy trucks, buses, recreational vehicles, and specialty vehicles such as ambulances and fire trucks. Retail sales of motorcycles, mopeds and bicycles are not included in this industry.

Auto dealerships distribute the finished vehicles to the customers. They trade in new vehicles and there also exists a huge demand and market for used vehicles. These dealerships can deal in either new or used, or both. Generally dealerships also provide additional services for vehicle owners, such as vehicle maintenance services and replacement parts. Some dealerships also arrange financing options for vehicle buyers.

Industry Products:

• Cars

• Sports utility vehicles and pickup trucks

• Light commercial vehicles

• Heavy trucks

• Buses

• Recreational vehicles

• Specialty vehicles

Industry Activities: • Sales and service of cars and light trucks

• Sales and service of heavy trucks

• Sales and service of specialty vehicles

• Sales and service of buses

• Sales and service of vans and other commercial vehicles

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Automotive Industry: The Key Industry Drivers

There are four key business drivers that impact the automotive industry: economic conditions, consumer preferences, government, and technological advances. Globalization is also influencing industry to a great extent. In this article we will discuss in detail about each of these business drivers.

Economic Conditions:

The first key driver is economic conditions. When economic conditions are favorable, people are more likely to purchase new vehicles giving momentum to the industry. Slowdown in economic output leads to reduced consumer and business confidence and levels of vehicle consumption goes down.

Automotive manufacturers need to plan capacity to achieve economies of scale. Companies plan their capacities based on their sales predictions which are totally dependent on economic cycles. The capacity issue has a strong influence on industry economics as vehicle prices are calculated on forecast capacities and reduced capacity means higher unit costs. Vehicle makers, therefore, get heavily impacted due to economic conditions.

Consumer Demand and Interests:

The second key driver is consumer interest, their preferences and demand. There is a growing demand for more choice. Volume production may become similar to that for premium cars, with a greater number of vehicles being made to order on the basis of a multi-option choice. The market for niche vehicles is growing, as consumers demand more variation of body shape and styling. This has led to a variety of body shapes being constructed on standard platforms.

There is an increased awareness of occupant and pedestrian safety, and consumers also look for greater fuel economy, exemplified by the growing rise of fossil fuel prices. Consumer are becoming more aware of specifications and looking for inclusion of more on-board electronics and telecommunications systems. Automobile safety is tremendously important to consumers in all markets and consumers are willing to pay more for vehicles with safety features.

Globalization:

The third key driver is globalization and global industry influences. Today, the modern global automotive industry operates in a global competitive marketplace. Globalization of the automotive industry has been greatly accelerated during the last half of the 1990's due to the construction of important overseas facilities and establishment of mergers between giant multinational automakers. The world's largest automobile manufacturers invest into production facilities in emerging markets in order to reduce production costs. Automakers, have merged with, and in some cases established commercial strategic partnerships with other automobile manufacturers, enabling them to expand in overseas markets.

Increasing global competition amongst the global manufacturers and positioning within foreign markets has divided the world's automakers into three tiers, the first tier being GM, Ford, Toyota, Honda and Volkswagen, and the two remaining tier manufacturers attempting to consolidate or merge with other lower tier automakers to compete with the first tier companies.

Technological Innovations:

The fourth key driver influencing automotive industry significantly is Technology. Automotive companies seek to take advantage of sophisticated technology to address the competitive pressure and to meet increased customer expectations on quality and cost. Technological advances help them add value to their vehicles and offset the squeeze on costs and profit margins. Technology also helps them meeting the demands of environmental legislation. It is through technology that manufacturers are able to address consumer demands for increased safety and sophistication.

Other innovations that consumers are interested in include features that improve navigation, like GPS, and features that enhance entertainment, including satellite radio and in-car access to digital music.

In terms of the vehicle, the innovations that are likely to be in demand are more electronics and telematics, move to a 42-volt electrical system, safety improvements, electrically controlled steering, braking, ABS and suspension. There might be continued development of electric, hybrid and fuel cell drives, especially for city cars and fleet vehicles.

Features likely to be introduced could be sophisticated route guidance, inter-model route planning, lane guidance and proximity radars for speed control and warning systems. The consumer in this sector always demands innovation and technology-driven innovations such as fuel-efficient, safer, more comfortable low-emission vehicles will shape the future of the industry.

Government & Regulations:

The fifth key driver of the automotive industry is government. Legislation is a major driver of the industry; emissions and recycling legislation have a strong impact both on vehicle technologies and construction. In many countries, governments have imposed strict environmental regulations dealing with fuel economy and emissions control on auto manufacturers. These environmental legislations vary in different countries and define standards that are compulsory for all vehicles sold in those countries. This has huge impact on global auto manufacturers as they must keep updating the products they sell in different parts of the world to comply with these regulations. This can add significantly to manufacturing costs.

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Automotive Industry Supply & Value Chain

Most of the automotive manufacturers employ a business model that demands collaboration between different assemblers and cadre of parts suppliers with a lean, flexible, just- in-time (JIT) assembly process. In this article we will discuss the business model of typical automotive manufacturer and the various stages from planning to final retailing of the product.

Industry’s Business Model: