Automobiles & Trucks OVERVIEW
The automobile industry surged ahead worldwide in recent years, with particularly sharp growth in the U.S.
Analysts at IHS Automotive forecast the global market at 93.5 million units for 2017.
Car sales within North American markets have been running at very high rates.
U.S. car and light truck sales totaled a record 17.44 million units for 2016, according to National Automobile Dealers Association.
This was a slight decrease from 17.47 million units sold in 2015 and an increase over 16.45 million units sold in 2014.
sales had slowed a bit through the first half of 2017, but massive losses of cars and trucks due to hurricanes Harvey and Irma in August and September 2017 will increase demand for both new and used vehicles as replacements.
Mexico's sales were expected to grow by as much as 3.8% in 2017, to 1.66 million units, while Canadian sales were expected to grow slightly to 2.00 million, according to analysts at Scotia Bank.
The biggest upward trend in auto sales has been in China.
While estimates of its annual unit sales vary widely, China has clearly become the world's largest car market with about 23.6 million units sold in 2016.
However, China's sales are subject to change due to such factors as economic growth, the availability of credit and the regulatory environment.
China's government has a great
The automobile industry surged ahead worldwide in recent years, with particularly sharp growth in the U.S. and China. Analysts at IHS Automotive forecast the global market at 93.5 million units for 2017.
Car sales within North American markets have been running at very high rates. U.S. car and light truck sales totaled a record 17.44 million units for 2016, according to National Automobile Dealers Association. This was a slight decrease from 17.47 million units sold in 2015 and an increase over 16.45 million units sold in 2014.
U.S. sales had slowed a bit through the first half of 2017, but massive losses of cars and trucks due to hurricanes Harvey and Irma in August and September 2017 will increase demand for both new and used vehicles as replacements. Mexico’s sales were expected to grow by as much as 3.8% in 2017, to 1.66 million units, while Canadian sales were expected to grow slightly to 2.00 million, according to analysts at Scotia Bank.
The biggest upward trend in auto sales has been in China. While estimates of its annual unit sales vary widely, China has clearly become the world’s largest car market with about 23.6 million units sold in 2016. However, China’s sales are subject to change due to such factors as economic growth, the availability of credit and the regulatory environment. China’s government has a great deal of control over the market, as, at any time, it may increase sales by encouraging new auto loans, or decrease sales by adding new registration fees or restricting traffic in major cities in order to reduce congestion and pollution.
One of the biggest winners by far in today’s highly competitive automobile market has been Korea, where Hyundai, along with its brand Kia, have enjoyed soaring global sales. Consumers are attracted to their reasonable prices, excellent warranties and world class quality.
There were approximately 264 million cars and light trucks in operation in the United States, as of 2016. Around the world, there were about 1.2 billion cars and light trucks on the road in early 2017, a number that has been growing by roughly 50 million yearly, as new vehicles are sold and a portion of the global fleet is scrapped.
Most major car makers are aggressively pushing their crossover vehicles, which are an excellent compromise in design that offers large passenger and cargo compartments, good visibility and reasonably good gas mileage. Crossovers are essentially replacing sedans and some vans as the new family car.
At the same time, manufacturers are forced to continue to invest in smaller, high efficiency vehicles due to U.S. government mandates that they meet high average miles-per-gallon rules. Chrysler is relying heavily on its relationship with Fiat for new, fuel efficient models of modest size. Honda, Volkswagen, Toyota, Hyundai, Nissan and Peugeot all have invested in new, advanced small cars. All major luxury brands like Mercedes, BMW, Lexus and Audi have relatively small cars on the market and will steadily introduce a wide range of fuel efficient designs, including electric and hybrid gas-electric vehicles. BMW introduced its iSeries high efficiency cars, including a three-cylinder engine that is part of a new plug-in hybrid.
Engineers are pushing technological changes in their larger cars and light trucks in order to enhance their fuel efficiency. An excellent example is the launch of the Ford F150 full-size pickup truck that relies on the use of aluminum body panels and advanced engine/transmission combinations to dramatically reduce weight and improve mileage. This truck has been selling in very large numbers in the U.S., as have the Chevy Silverado and Chrysler Ram full-size pickups. Recent drops in gasoline prices have boosted this trend.
GM is betting heavily on its Chevrolet Cruze, a small sedan capable of 36 miles per gallon (mpg) on the highway and stuffed with convenience features that consumers appreciate. Ford’s revamped Fusion earned rave reviews, and it comes in either a hybrid model or a standard engine version that gets 31 mpg on the highway.
One result of frugal consumers, as well as buyers who prefer greener goods, has strong sales over the long term for Toyota’s Prius gasoline-electric hybrid car. The company has also made investments that enable it to manufacture hybrid versions of many of its popular models, including the Camry and several models of the Lexus. Hybrids are now available from a wide variety of makers, and technology has steadily improved. Nonetheless, hybrids remain a very small fraction of the overall car and truck market due to their relatively high initial costs. Also, hybrid sales have been softer in today’s era of extremely low gasoline prices.
Nissan offers competition in the electric vehicle sector with its all-electric model called Leaf. However, the high prices and limited range of batteries will cause many consumers to stay away from electric cars. In answer to this challenge, GM introduced the Chevy Bolt plug-in hybrid, with an exceptionally long range. And, since its introduction, Tesla, the U.S.-based maker of luxury, fully electric cars, has offered long-range vehicles. Tesla’s models offer the ability to drive a long distance due to their unique battery strategy. After establishing its business with a line of expensive luxury cars, Tesla recently launched a new, much more affordable model, and it has also introduced an SUV. The automobile industry is looking forward to the eventual development of advanced, long-range batteries at much lower cost, which may take until 2020 or later. Many of the world’s top research organizations are working steadily on this challenge.
Diesel engines for passenger cars suffered a massive setback in September 2015, when Volkswagen was accused of designing certain of its small car diesels so that they would perform better in emissions tests than they do during actual road driving. This is not only a massive scandal and a huge potential financial liability for VW (an estimated 11 million cars had been sold worldwide that may possibly contain such engines, including about 2 million Audis), but also a substantial setback, through negative consumer perceptions, for all diesel car makers. Manufacturers including BMW, Volkswagen and Mercedes-Benz have been making and selling diesel cars, particularly in Europe.
Meanwhile, the use of ethanol as a gasoline additive in America has grown substantially over the long term, whether or not it makes any environmental or economic sense, thanks to requirements enacted by Congress. However, Congress recently dropped its financial subsidies to ethanol.
The rising affluence of consumers in China has been creating both huge opportunities and major problems. China has become the world’s largest user of energy overall and one of the world’s largest importers of petroleum products, partly to fuel its burgeoning fleet of cars and trucks. Streets and highways are clogged with vehicles, to the extent that traffic and smog are nightmarish. Automakers from abroad have raced to establish plants and partnerships in China.
India has also seen significant growth in its automotive manufacturing in recent years, and its auto exports are growing. India-based Tata now owns the prestigious Jaguar and Land Rover brands.
Not to be overlooked are the vast changes taking place in automobile manufacturing plants. Flexible factories have reduced man-hours and cut costs per car, while offering a much wider range of choices for customization by consumers. The wide use of robotics, advanced factory software and lean inventory methods have completely revamped the modern car factory. 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. Bankruptcies at GM and Chrysler in 2009 enabled these firms to shed debt, cut employees, renegotiate contracts and dramatically reduce operating costs.
Inexpensive cars manufactured in China are now on the market in many emerging nations. The question is not whether China will export cars and trucks, but whether consumers in advanced markets such as America will be convinced that they offer safety and reliability. Meanwhile, U.S. automakers have made intense demands on their component suppliers for lower prices—these suppliers are, in turn, looking to low-cost production in China, Mexico and elsewhere.
European manufacturers are facing challenges of their own. High costs, tough labor laws and daunting government regulations are constant challenges to manufacturers in Europe. Nonetheless, firms like Volkswagen and Daimler/Mercedes-Benz have found great success in the global market over a period of many decades, often locating plants in nations where their products sell well, including major plants in the U.S.
The thought of the next billion automobile owners/users is either the most intriguing or the most terrifying vision for the near future, depending on how you look at it. Future global demand for cars could possibly outstrip today’s levels, creating immense business opportunities.
However, the combination of car sharing strategies like ZipCar, ride sharing systems like Uber and autonomous vehicles capable of driving themselves will have very profound effects on automobile manufacturing, usage, sales and ownership patterns. At least in dense urban environments, the result is very likely to be a large proportion of individuals who opt to use shared vehicles rather than user-owned cars.
Surveys show that many young adults have little interest in owning a car of their own, which is vastly different from the attitude that was held by previous generations. Car sharing is such a strong trend that car rental giant Avis acquired Zipcar, a pioneer in this area. Even major auto makers, like BMW with its DriveNow program, are starting their own car sharing schemes, hoping to develop strategies that are well in tune with changing consumer trends. Major automobile makers, when looking to the future, talk in terms of delivering “mobility services” as much as automobiles, while they consider the looming effects of car-sharing and ride-on-demand services.
Car safety has made dramatic progress in recent years, mainly by adopting technologies such as backup cameras, anti-skid, advanced brakes and collision avoidance systems. Now, virtually all major car makers are heavily invested in technologies that will enable cars to essentially drive themselves.
The automobile and heavy truck sectors are rapidly forging ahead with remarkable technologies for self-driving (autonomous) vehicles. The first step is vehicles that communicate with each other while utilizing advanced technologies to safely stay in lanes, regulate speeds and apply emergency braking. (This is referred to as vehicle-to-vehicle communications, and is part of an overall digital strategy known as ITS, or intelligent transportation systems.)
Automobiles have become high-powered computers on wheels, as many automotive systems are now controlled by chips and software. At the same time, auto makers are finding innovative ways to use the latest in wireless and smartphone technologies, including apps, to enhance the entertainment, information and communications capabilities of vehicles. Automotive “infotainment” has become a dominant theme.