Automobile Manufacturing
Description
Companies in this industry engage in manufacturing complete automobile and light duty motor vehicles, as well as vehicle chassis only. Major companies include Ford, General Motors, and Tesla (all based in the US); along with Honda and Toyota (both based in Japan); SAIC Motor (China); Stellantis (the Netherlands); and Volkswagen (Germany).
Annual car sales grew to about 78 million in 2024, up from about 75 million in 2023, according to Statista. Demand in China will lead global growth but is slowing amid a cooling economy. Leading countries for car manufacturing include China, Germany, Japan, South Korea, and the US. Unit sales are highest in China, North America, and Western Europe.
The US automobile manufacturing industry includes about 230 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $300 billion.
COMPETITIVE LANDSCAPE
The global auto industry is dominated by a small number of US, Western European, and Japanese companies. In the pursuit of sales and market share growth, the major companies have expanded aggressively into emerging markets by setting up local subsidiaries or joint ventures. Domestic manufacturers in emerging markets often enjoy tax benefits or other policies that give them an advantage over foreign competitors. Manufacturers in emerging markets also have global expansion ambitions and are increasingly exporting their products to both established and other developing markets.
Demand is driven by employment, wage growth, and interest rates. The profitability of individual companies depends on manufacturing efficiency, product quality, and effective marketing. Large companies have economies of scale in purchasing and marketing; smaller companies can compete by focusing on specialized markets.
Competitive Advantages:
Developing a Focused Strategy - Amid transformative trends including electric drivetrains, autonomous technologies, vehicle connectivity, mobility services, and emerging global markets, having a cohesive strategy is essential. Trying to do too much to address these trends could be as risky as doing nothing. Industry watchers suggest automakers need to develop and execute strategies that play to core brand strengths while investing in technologies that reinforce and complement those strengths.
Global Flexibility - Shifts in demand, product preference, and regulations can occur suddenly, and in different geographic locations. As carmakers are increasingly global in scale, product development, production, marketing, and supply chain operations need to be agile enough to respond quickly to changes in individual markets.
Optimized Product Mix - Industry insiders suggest the concept of being all things to all buyers is a dated automotive product strategy. Some companies focus more on luxury brands and SUVs, while others may emphasize fuel-efficient, middle-market offerings. Key to success is finding the right blend of products and brands across the various regions in which the company operates.
Companies to Watch:
Ford Motor builds cars and trucks under the Ford and Lincoln brands. The company's Ford Motor Credit division is one of the US's leading auto finance companies. The company plans to pare its car offerings down to the Mustang to focus on trucks, SUVs, and crossovers.
General Motors (GM) makes cars and trucks, with well-known brands such as Buick, Cadillac, Chevrolet, and GMC. In 2017, GM sold its European operations to focus on North America, China, and autonomous technologies.
Honda Motor is Japan's #2 automaker (after Toyota) and the world's largest motorcycle producer. The company also makes a line of ATVs and personal watercraft. Honda's power products division makes commercial and residential machinery, portable generators; and outboard motors.
Hyundai Motors is South Korea's leading carmaker and produces compact and luxury cars, SUVs, minivans, trucks, buses, and other commercial vehicles. The company operates manufacturing plants in China, the Czech Republic, India, Russia, South Korea, Turkey and the US. Hyundai also owns a 34% stake in Kia Motors.
Toyota Motor is among the world's largest automotive manufacturers by revenue and designs and manufactures a diverse product line-up that ranges from subcompacts to luxury and sports vehicles to SUVs, trucks, minivans, and buses. The company is a pioneer in the gasoline-electric hybrid vehicle market.
Volkswagen (VW) is Europe's leading carmaker and second in the world by vehicle sales, after Toyota. VW owns several luxury brands including Audi, Lamborghini, Porsche, Bentley, and Bugatti, as well as Spanish automaker SEAT, Czech automaker Škoda, and commercial vehicle makers Scania and Man.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products are complete passenger vehicles (about 30% of revenue). The light truck segment, which includes SUBs, has a higher average price. Cars and trucks are produced on assembly lines, an invention of the auto manufacturing industry of the early 1900s. Many refinements have made the assembly line more efficient. Robotics and other advances in automation have reduced the number of workers on a line.
A typical automobile plant has capacity to produce about 300,000 vehicles annually. Flexible manufacturing has enabled different car models to be manufactured on the same assembly line, saving hundreds of millions in setup and tooling costs. Tighter tolerance of parts enables greater consistency of product quality and reduces line stoppages. Most parts used to assemble passenger cars are bought from OEM parts manufacturers, but car companies often operate plants that manufacture key components such as engines and transmissions.
Raw materials include steel, aluminum, glass, plastic, rubber, and coatings. As many as 15,000 parts are required on some vehicle assemblies. In the US, material costs represent a significant part of total shipment value. Assembly plants require a high degree of supply chain management and coordination, as many parts and sub-assemblies are delivered to assembly plants for same day usage to minimize inventory storage and carrying costs. Many suppliers have established manufacturing or warehouse locations near assembly plants.
Annual car sales grew to about 78 million in 2024, up from about 75 million in 2023, according to Statista. Demand in China will lead global growth but is slowing amid a cooling economy. Leading countries for car manufacturing include China, Germany, Japan, South Korea, and the US. Unit sales are highest in China, North America, and Western Europe.
The US automobile manufacturing industry includes about 230 establishments (single-location companies and units of multi-location companies) with combined annual revenue of about $300 billion.
COMPETITIVE LANDSCAPE
The global auto industry is dominated by a small number of US, Western European, and Japanese companies. In the pursuit of sales and market share growth, the major companies have expanded aggressively into emerging markets by setting up local subsidiaries or joint ventures. Domestic manufacturers in emerging markets often enjoy tax benefits or other policies that give them an advantage over foreign competitors. Manufacturers in emerging markets also have global expansion ambitions and are increasingly exporting their products to both established and other developing markets.
Demand is driven by employment, wage growth, and interest rates. The profitability of individual companies depends on manufacturing efficiency, product quality, and effective marketing. Large companies have economies of scale in purchasing and marketing; smaller companies can compete by focusing on specialized markets.
Competitive Advantages:
Developing a Focused Strategy - Amid transformative trends including electric drivetrains, autonomous technologies, vehicle connectivity, mobility services, and emerging global markets, having a cohesive strategy is essential. Trying to do too much to address these trends could be as risky as doing nothing. Industry watchers suggest automakers need to develop and execute strategies that play to core brand strengths while investing in technologies that reinforce and complement those strengths.
Global Flexibility - Shifts in demand, product preference, and regulations can occur suddenly, and in different geographic locations. As carmakers are increasingly global in scale, product development, production, marketing, and supply chain operations need to be agile enough to respond quickly to changes in individual markets.
Optimized Product Mix - Industry insiders suggest the concept of being all things to all buyers is a dated automotive product strategy. Some companies focus more on luxury brands and SUVs, while others may emphasize fuel-efficient, middle-market offerings. Key to success is finding the right blend of products and brands across the various regions in which the company operates.
Companies to Watch:
Ford Motor builds cars and trucks under the Ford and Lincoln brands. The company's Ford Motor Credit division is one of the US's leading auto finance companies. The company plans to pare its car offerings down to the Mustang to focus on trucks, SUVs, and crossovers.
General Motors (GM) makes cars and trucks, with well-known brands such as Buick, Cadillac, Chevrolet, and GMC. In 2017, GM sold its European operations to focus on North America, China, and autonomous technologies.
Honda Motor is Japan's #2 automaker (after Toyota) and the world's largest motorcycle producer. The company also makes a line of ATVs and personal watercraft. Honda's power products division makes commercial and residential machinery, portable generators; and outboard motors.
Hyundai Motors is South Korea's leading carmaker and produces compact and luxury cars, SUVs, minivans, trucks, buses, and other commercial vehicles. The company operates manufacturing plants in China, the Czech Republic, India, Russia, South Korea, Turkey and the US. Hyundai also owns a 34% stake in Kia Motors.
Toyota Motor is among the world's largest automotive manufacturers by revenue and designs and manufactures a diverse product line-up that ranges from subcompacts to luxury and sports vehicles to SUVs, trucks, minivans, and buses. The company is a pioneer in the gasoline-electric hybrid vehicle market.
Volkswagen (VW) is Europe's leading carmaker and second in the world by vehicle sales, after Toyota. VW owns several luxury brands including Audi, Lamborghini, Porsche, Bentley, and Bugatti, as well as Spanish automaker SEAT, Czech automaker Škoda, and commercial vehicle makers Scania and Man.
PRODUCTS, OPERATIONS & TECHNOLOGY
Major products are complete passenger vehicles (about 30% of revenue). The light truck segment, which includes SUBs, has a higher average price. Cars and trucks are produced on assembly lines, an invention of the auto manufacturing industry of the early 1900s. Many refinements have made the assembly line more efficient. Robotics and other advances in automation have reduced the number of workers on a line.
A typical automobile plant has capacity to produce about 300,000 vehicles annually. Flexible manufacturing has enabled different car models to be manufactured on the same assembly line, saving hundreds of millions in setup and tooling costs. Tighter tolerance of parts enables greater consistency of product quality and reduces line stoppages. Most parts used to assemble passenger cars are bought from OEM parts manufacturers, but car companies often operate plants that manufacture key components such as engines and transmissions.
Raw materials include steel, aluminum, glass, plastic, rubber, and coatings. As many as 15,000 parts are required on some vehicle assemblies. In the US, material costs represent a significant part of total shipment value. Assembly plants require a high degree of supply chain management and coordination, as many parts and sub-assemblies are delivered to assembly plants for same day usage to minimize inventory storage and carrying costs. Many suppliers have established manufacturing or warehouse locations near assembly plants.
Table of Contents
- Industry Overview
- Quarterly Industry Update
- Business Challenges
- Business Trends
- Industry Opportunities
- Call Preparation Questions
- Financial Information
- Industry Forecast
- Web Links and Acronyms
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