See the complete list of trends that we analyze.

1. Automobile Industry Introduction

In the U.S., the 2008 car and light truck market dropped dramatically, to approximately. 13.2 million units for the year, down by about 2.9 million from the number of units sold in 2007. Globally, Scotiabank Group estimates that about 52 million new cars and light trucks were sold in 2008, down from nearly 55 million the previous year.

By early 2009, the global automobile industry was in a deep slump. Sales were dropping substantially. Auto makers were short of cash—some, including Saab, took bankruptcy. GM and Chrysler each received a combined $17.4 billion in federal aid, which was tied to a requirement that the firms develop specific plans for staying afloat. Those plans include concessions from labor unions, fewer workers and fewer plants. Very substantial additional sums of aid or financing will be required if GM is to stay solvent. Chrysler also has significant financial problems, and its private owners are attempting to put together a strategic relationship whereby Nissan would own about 35% of the firm. U.S. car manufacturers will cut capacity by at least 500,000 units yearly.

Outside of the U.S., Toyota received some financing from the Japanese government, and car makers throughout Europe and Asia were seeking concessions and/or financial aid.

Further auto industry bankruptcies are inevitable, possibly at auto manufacturers, and definitely at auto dealers and suppliers.

By February, 2009 was shaping up to be a very dismal year for the industry. In the U.S., unit sales fell 41% over February 2008, despite generous rebates and discount offers.

Analysts at Scotiabank Group expect 2009 sales to total a very weak 11.5 million units in the U.S., 14.23 million units in Asia (including 5.29 in China and 1.23 in India), 1.48 million units in Canada and 12.46 million units in Western Europe. Overall, Scotiabank forecasts 47.68 million units to be sold in 2009, down from 52.17 in 2008. However, by March 2009 sales were so slow that actual results may turn out to be much worse.

Worldwide, automobile consumers have encountered great difficulty in obtaining financing when the want to purchase a new car due to the global credit crisis. Meanwhile, the consumer’s best friend is an old paid-for car, and most consumers are reluctant to purchase an expensive new vehicle.

The only winners in the current environment may be Korea and Mexico, where auto making plants are modern, quality is good (actually quality is world class in Korea) and currency values have plummeted to the extent that cars and parts made in those two nations are now extremely competitive on a global basis.

There are approximately 250 million vehicles in operation in the United States. Around the world, there were about 806 million cars and light trucks on the road in 2007. By 2020, that number will reach 1 billion. Currently, those vehicles burn over 260 billion gallons of fuel yearly.

the U.S., as of 2007, the industry included about 20,700 new-car dealerships and 996,800 million manufacturing employees (down from l.07 million the previous year). Total revenues at new-car and light truck dealers were $693 billion, according to NADA, and employment at new and used car dealers of all types totaled more than 1 million. However, as 2008 ended, large numbers of new car dealers were closing or failing, and major manufacturer GM indicated that it wants to dramatically reduce the size of its dealer network.

The years of 2004 through 2006 will long be remembered as a pivotal period in the automobile industry. It was a period during which high gasoline prices finally created significant demand among U.S. consumers for fuel-efficient vehicles. Gasoline prices of approximately $2.00 per gallon started taking a huge bite out of family budgets in 2004, and many middle-class consumers who owned fuel guzzling SUVs and pickup trucks began to wish they had vehicles that were much less expensive to operate. By 2005-2006, with gasoline prices in the $3.00 range, the party was over for large SUVs and family trucks.

Retail gasoline prices of more than $4.00 per gallon for much of 2008 literally put the brakes on new car sales—it was a dismal year for the car industry as a whole. Through the eight months ending with August 2008, car industry sales were down 11.2% in the U.S., with sales of pickup trucks, minivans and SUVs down 19.3%.

result has been strong demand for Toyota’s Prius hybrid car over recent years. Toyota responded by raising the price and planning production increases. Meanwhile, Toyota made investments in its Georgetown, Kentucky plant to enable it to manufacture hybrid Camrys. Meanwhile, there has been good demand for Toyota’s Lexus RX400h hybrid crossover. Ford launched its first hybrids, and other carmakers, including GM, were greatly encouraged in their own efforts to bring more hybrids to the market. However, consumers generally aren’t as impressed with U.S. hybrid technology as they are with that of Toyota models, and actual mileage results on the road are often disappointing, largely due to driver habits such as quick acceleration which uses more fuel. Over the mid-term, many hybrids will be available from a wide variety of makers, and technology will steadily improve.

In the American market for the first eight months of 2008, Toyota sold 119,688 Prius hybrids, 36,633 Camry hybrids, 15,651 Highlander hybrids and 11,754 Lexus 400h hybrids. Honda sold 25,577 Civic hybrids during the same period.

However, the most important trend over the mid term will be rapid growth in plug-in hybrids (PHEVs) and electric vehicles such as GM’s Volt (scheduled for a 2010 debut), a car that will include a gasoline-powered generator capable of charging up the batteries for those occasions when it is not convenient to plug in. Tremendous improvements in battery technology will soon come to market, further enhancing this trend.

Other fuel-efficient vehicles, such as BMW’s MINI Cooper, and the Smart, recently introduced to the U.S., have enjoyed soaring demand.

and emissions regulators are taking a renewed interest in advanced automobile technologies. Clean diesel engines, like those offered in new cars from Volkswagen and Mercedes-Benz, offer exceptional performance and fuel economy while providing the quiet, vibration-free running associated with gasoline engines. Clean diesel offers a particularly attractive alternative over hybrid technology in the U.S. market, and is already widely used in passenger vehicles in Europe. The use of ethanol as a gasoline additive in America has grown rapidly, regardless of whether it makes any environmental or economic sense, thanks to requirements enacted by Congress.

, sales of heavy SUVs lagged miserably, and automakers such as Chevy, Hummer and Cadillac offered large dealer incentives and rebates in an effort to move these vehicles. Ford cancelled production of its larger-than-life Excursion SUV in which some owners reported getting as little as 11 mpg in the city, and GM cancelled production of the massive Hummer H1.

consumers outside the U.S. made history as well. The rising affluence of consumers in China created both huge opportunities and huge problems. China has become one of the world’s largest importers of petroleum products, largely to fuel its burgeoning fleet of cars and trucks. Streets and highways are clogged with new cars, to the extent that traffic and smog are a nightmare. Automakers from all nations raced to establish plants and partnerships in China to produce cars both for domestic use and for export. In fact, low labor costs and increasing product quality in China threaten auto plants located in high cost nations such as the U.S. However, the global economic slowdown of 2008-2009 put a serious damper on the economy in China, and car sales are off dramatically. The same can be said in once-booming markets of India and Brazil.

India, local industrial giant Tata will launch, in July 2009, a no-frills Indian car called Nano, at a base price equal to about $2,000 U.S dollars.

to be overlooked are the vast changes taking place in automobile manufacturing. Flexible factories have reduced man-hours and costs per car, while offering a much wider range of choices for customization to consumers. Today, more than ever, car manufacturers and their suppliers are cooperating in the design and manufacture of new cars in ways that are revolutionizing the entire process.

cars manufactured in China will soon be on the market in the U.S. The question is not whether China will export cars and trucks, but whether consumers will be convinced that they offer safety and reliability. Meanwhile, U.S. automakers are making intense demands on their component suppliers for lower prices—these suppliers are, in turn, looking to low-cost production in China. Meanwhile, the Big Three (American automakers GM, Ford and Chrysler) face difficult times at best. The Detroit companies are under intense competitive pressure from foreign-based firms while enduring high labor costs at home. These firms are struggling to reengineer all parts of their operations, from design to manufacturing to marketing in order to cut costs and regain market share.

has undergone the most gut-wrenching change of all: a new owner. Cerberus Capital Management, one of the world’s largest private equity investment firms, purchased Chrysler from DaimlerChrysler AG during 2007. Daimler had purchased Chrysler several years ago, only to find itself battling the many challenges facing U.S. automobile manufacturers. Daimler was more than happy to unload it. The German-based DaimlerChrysler renamed itself Daimler AG. Chrysler legally became Chrysler LLC. This is one of many major investments made by Cerberus in the ailing auto industry, including investments in parts manufacturers and in car loans provider GMAC. Cerberus hopes to be able to introduce better management, new strategies and greater operating efficiencies in these companies. However, results to date have been disappointing, largely because Cerberus bought in just in time for a massive market downturn.

the summer of 2008, the Big Three were lobbying for long-term loans from the U.S. Government totaling as much as $50 billion. Some funds have been provided. More may be forthcoming if management provides convincing plans for reorganization before the summer of 2009, but the big question is whether GM (and possibly Chrysler) will be forced to seek bankruptcy protection in order to stay in business. Meanwhile, Ford, GM and Chrysler are encouraged by the fact that Congress, in 2007, passed a law authorizing loans of as much as $25 billion to help automakers and related suppliers bear the cost of changes in manufacturing needed to produce highly efficient vehicles. However, the current law requires that the Department of Energy set up a system for processing and granting such loans.

parts manufacturing business in the U.S. is equally dismal. Delphi Corp, the giant supplier that was part of GM until 1999, lost nearly $4.6 billion in 2004 alone and declared bankruptcy in 2005. The company had been unable to find financing to enable it to exit bankruptcy as of late 2008.

car manufacturers such as Toyota and Honda are feeling the global economic pain along with the rest of the industry. South Korean makers Hyundai and Kia have established themselves as true, high-quality manufacturers with a growing global customer base. They will give the Japanese and Americans very tough competition over the long term.

manufacturers are facing challenges of their own. High costs, tough labor laws, daunting government regulations and a few disappointing model designs have hampered recent results. Meanwhile, European markets are suffering from a general economic slowdown, leading to poor automobile sales results.

Progressive Insurance Automotive X PRIZE is offering $10 million in cash to the first competitor able to create a viable passenger vehicle capable of operating at the equivalent of 100 miles per gallon. The competition is in conjunction with the X PRIZE Foundation. As of mid 2008, more than 70 teams had registered to compete, from 12 nations.