The United States is home to the largest passenger vehicle market of any country in the world. Overall, there were an estimated 254.4 million registered passenger vehicles in the United States according to a 2007 DOT study. This number, along with the average age of vehicles, has increased steadily since 1960, indicating a growing number of vehicles per capita. The Chinese car market, however, is poised to soon exceed the United States; by the end of 2012, there were over 240 million cars on the road in China.
The United States is also home to three large vehicle manufacturers: General Motors, Ford Motor Company and Chrysler, which have historically been referred to as the “Big Three.” Chrysler however is no longer among the top three; but is number five, behind Toyota and Honda. The motor car has clearly become an integral part of American life, with vehicles outnumbering licensed drivers.
The United States Department of Transportation’s Federal Highway Administration as well as the National Automobile Dealers Association have published data in regard to the total number of vehicles, growth trends, and ratios between licensed drivers, the general population, and the increasing number of vehicles on American roads. Overall passenger vehicles have been outnumbering licensed drivers since 1972 at an ever increasing rate, while light trucks and vehicles manufactured by foreign marques have gained a larger share of the automotive market in the United States. In 2001, 70% of Americans drove to work in car. New York City is the only locality in the country where more than half of all households do not own a car (the figure is even higher in Manhattan, over 75%; nationally, the rate is 8%)
Total number of vehicles
According to the US Bureau of Transportation Statistics for 2009 there are 254,212,610 registered passenger vehicles. Of these, 193,979,654 were classified as “Light duty vehicle, short wheel base”, while another 40,488,025 were listed as “Light duty vehicle, long wheel base.” Yet another 8,356,097 were classified as vehicles with 2 axles and 6 tires and 2,617,118 were classified as “Truck, combination.” There were approximately 7,929,724 motorcycles in the US in 2009.
According to cumulative data by the Federal Highway Administration (FHWA) the number of motor vehicles has also increased steadily since 1960, only stagnating once in 1997 and declining from 1990 to 1991. Otherwise the number of motor vehicles has been rising by an estimated 3.69 million each year since 1960 with the largest annual growth between 1998 and 1999 as well as between 2000 and 2001 when the number of motor vehicles in the United States increased by eight million. Since the study by the FHA the number of vehicles has increased by approximately eleven million, one of the largest recorded increases. The largest percentage increase was between the years of 1972 and 1973 when the number of cars increased by 5.88%.
Age of vehicles in operation
In the year 2001, the National Automobile Dealers Association conducted a study revealing the average age of vehicles in operation in the US. The study found that of vehicles in operation in the US, 38.3% were older than ten years, 22.3% were between seven and ten years old, 25.8% were between three and six years old and 13.5% were less than two years old. According to this study the majority of vehicles, 60.6%, of vehicles were older than seven years in 2001. This relatively high age of automobiles in the US might be explained by unaffordable prices for comparable new replacement vehicles and a corresponding gradual decline in sales figures since 1998. Also, many Americans own three or more vehicles. The low marginal cost of registering and insuring additional older vehicles means many vehicles that are rarely used are still given full weight in the statistics.
The median and mean age of automobiles has steadily increased since 1969. In 2007 the overall median age for automobiles was 9.4 years, a significant increase over 1990 when the median age of vehicles in operation in the US was 6.5 years and 1969 when the mean age for automobiles was 5.1 years. Of all body styles, pick-up trucks had the highest mean age in 2001 (9.4 years), followed by cars with a mean age of 8.4 years and van with a mean age of 7.0 years. As SUVs are part of a relatively new consumer trend originating mostly in the 1990s, SUVs had the lowest mean age of any body style in the US (6.1 years). The average recreational vehicle was even older with a mean age of 12.5. For all body styles the mean vehicle age increased fairly steadily from 1969 to 2001.
In March 2009, RL Polk released a study conducted between 2007 to 2008 which indicated that the median age of passenger cars in operation in the US increased to 9.4 years, and that the median age for light trucks increased from 7.1 years in 2007 to 7.5 years in 2008. As of 2011, the median age for all vehicles in the US had risen to 10.8 years. While the age has increased the number of service/repairs has remained the same at 4.2 times per year. That number took a decline in 2010 to 3.6. This number takes into account cash for clunkers when approximately 850,000 vehicles were removed from the public domain.
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).
The world’s automakers face a rate of change unlike that of any other time in the industry’s history. Digitalization, connectivity, evolving powertrain technologies, tougher regulations, and shifts in consumer attitudes have created unprecedented challenges as well as opportunities. In pursuit of sales growth, global automakers have invested heavily in emerging markets, but slower demand, especially in China, has highlighted the risks of these investments. Accurately assessing economic conditions in specific markets has become more important than ever for automakers.
Annual car sales grew to over 67 million in 2022, up from about 66 million in 2021, according to Statista. These figures reflect a downward trend due to the adverse economic effects of the COVID-19 pandemic. 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.
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As manufacturing momentum shifted toward auto parts suppliers, so too did the share of labor. Since the early 1960s, total employment in the U.S. auto industry has ranged between 700,000 and just over 1 million workers. Up until the mid-1980s, auto assemblers employed the majority of those workers, but from then on the employment share for automotive parts suppliers in the United States has consistently been greater than the share of workers at assembly plants. Between 1987 and 2002, the share of automotive sector employment at assembly plants declined from 44 percent to 36 percent, whereas the share of workers at automotive suppliers increased from 46 percent to 54 percent. Add to this change the influx of mostly non-unionized automotive transplants (foreign suppliers and assemblers), the outsourcing of parts and assembly to foreign nations, and the general sectoral shift away from manufacturing toward the service sector, and it is clear that the 1980s marked a turning point for labor in the U.S. auto industry.
Labor unions that represent autoworkers in the United States have had to weather a myriad of undulations in domestic business cycles since 1935, when the United Auto Workers (UAW) was founded. (Other unions that represent auto workers in the United States include the International Association of Machinists and Aerospace Workers of America, the United Steelworkers of America, and the International Brotherhood of Electrical Workers.) Recent changes in the organization of the auto industry and in the ownership of domestic firms, however, present uniquely formidable challenges to union strength. First, the implementation of lean manufacturing techniques and the drive to achieve globally competitive prices, quality, and delivery standards is likely to precipitate job cuts as suppliers strive to increase productivity.
Second, only a few automotive transplants in the United States allow union status—namely, NUMMI (GM-Toyota), Diamond Star (Chrysler-Mitsubishi), and Auto Alliance (Ford-Mazda), all of which are joint ventures with U.S. companies. Yet, total transplant employment is rising: Between 1993 and 2003 employment at transplants in the United States rose from 58,840 to 93,408. The UAW continues to strive to organize labor at transplants and is targeting supplier parks near unionized assemblers in an attempt to maintain locational control.
Third, outsourcing of production in a continuously globalizing industry diminishes the bargaining power of unions not just in the United States, but in Europe as well. Fourth, auto assemblers and suppliers are increasing their utilization of temporary workers. In Germany, BMW has a pool of temporary workers that can be utilized at different factories as needed, and in the United States auto assemblers are increasingly employing contract workers to reduce costs.
The globalization of the auto industry appears to challenge the status quo for labor in traditional regions of vehicle production. As employment in the industry shifts toward the supplier sector and toward emerging economies, the attempt to maintain good wages at traditional plants is paramount for autoworkers. Total hourly labor cost at GM and Ford for 2005 was estimated at $65.90, with $35.36 in wages and $30.54 in benefits, healthcare, and retirement costs. Other estimates for 2004 show earnings of production workers at assembly plants at $1,217 per week, whereas workers at parts plants earn $872 weekly, and workers in all manufacturing industries make an average of $529 per week. Autoworkers—particularly those who work in assembly plants in developed countries—certainly have a great deal at stake as the industry continues to globalize.
By contrast to labor, the power that dealerships exert on assemblers has historically been minimal. The push system of production meant that dealerships were the repositories for the inventory overruns of auto assemblers. Also, up until the 1960s, dealerships could legally be controlled by automakers. Therefore, auto dealers earn the majority of their profits from aftermarket sales of parts, accessories, supplies, and service, all of which are a small portion of their business. With the movement toward a pull system of production, dealerships could play a more important role in the automotive industry. However, the countervailing threat to dealerships is Internet-based sales, an innovation that stands to mitigate the market power of dealerships vis-à-vis auto assemblers.
Labor and trade unions are common in developed markets. In virtually all automobile assembly plants in the US owned by US automakers, production employees are represented by labor unions. Some US plants owned by foreign companies are nonunion. The European Commission sets basic standards for worker rights and working conditions, including general health and safety regulations, for EU member states. Chinese law prohibits independent trade unions, but the government has allowed some plant-level worker organization in some industries. Gradual reforms in China have led to higher manufacturing wages and better working conditions.
The average hourly wage for US motor vehicle production workers is slightly higher than the national average. Worker safety is a significant issue in auto manufacturing plants. The industry’s injury rate in the US is significantly higher than the national average.
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The American automobile industry became notorious for the manufacture of gas guzzlers during the 1960s and 1970s when fuel prices and consumer awareness concerning fuel economy were at an all-time low. In the 1960s and 1970s, American-made cars took on enormous proportions as consumers placed their emphasis on comfort, power and style. Large sedans from this era came to be known as land yachts, often rivaling today’s largest pick-up trucks in terms of length and width. In 1977, the Lincoln Continental Mark V was reviewed by the Germanautomobile magazine, auto motor und sport and still holds the record for the worst fuel economy of any vehicle ever tested by the magazine with an average of 7 MPG.
Following the 1973 oil crisis; however, smaller vehicles, often imported from Japan, became more and more popular with the American public as these vehicles featured better fuel economy ratings. In the late 1970s, the US government passed minimum fuel economy standards and in the 1980s American automobile manufacturers drastically downsized their cars, only a few vehicles, such as those using the Ford Panther platform retained their over-sized glory. The downsizing did, however, backfire in some cases. After downsizing nearly the entire Cadillac line-up in the late 1980s, General Motors scrambled to save its most prestigious marques.
Many American manufacturers again increased the size of their vehicles in the 1990s, while better technology allowed for better fuel economy ratings among sedans. USDOT MPG statistics differ dramatically from Corporate Average Fuel Economy (CAFE) statistics, with the latter being a sales-weighted composite and therefore presenting a more realistic picture of fuel economy in the USA. For example, for 2008, the CAFE composite was 28.2 mpg, substantially larger than the 17.2 mpg compiled by the USDOT.
According to the United States Department of Transportation, the average motor vehicle, including light trucks, in the US had a fuel economy rating of 17.1 MPG or 13.8 liters per 100 kilometers. The average fuel economy for passenger vehicles in the United States has remained stagnant throughout the 1990s and 2000s, peaking in 2001 and 2004. The 90s saw the slowest increase in fuel economy since 1960, with fuel economy increasing from 16.4 MPG in 1990 to 16.9 MPG in 2001. This is in contrast to the 1980s when the average fuel economy improved somewhat more significantly from 13.3 MPG in 1980 to 16.4 MPG in 1990. The increase in fuel economy during the 1990s is largely due to the rising popularity of Sport utility vehicles (SUV), whose status as light trucks gains them exception from the fuel economy restrictions placed on sedans and other cars.
Body style and size
Mainstream mid-size sedans such as the Chevrolet Impala or Ford Taurus are often perceived to be the typical and most common body style in the United States. While mid-size sedans are indeed among the country’s best selling vehicles, pick-up trucks held the top positions until mid-2008, rivaling sedans in the terms of total numbers sold. In the year 2006, the best selling models were the Ford F-Series with 796,039 units sold and the Chevrolet Silverado with 636,069 units sold. The Toyota Camry, Dodge Ram, and Honda Accord held the next three positions as the best selling cars. Rising oil prices stripped pick-up trucks of the “Best selling vehicle type” title in mid-2008. The Toyota Corolla currently holds the title.
Regional & International Issues
• The US is the world’s second-largest national car market, but it is mature and slow-growing
• Carmakers are under increasing political pressure to keep plants and jobs in the US
• Recent global carmaker investments have favored Mexico over the US and Canada
Major companies in North America include Ford Motor, General Motors, Tesla, and the Chrysler operations of UK-based Fiat Chrysler Automobiles (FCA). The US industry is highly concentrated: the 50 largest companies account for almost the entire industry in sales. Besides the largest automakers, the North American industry includes extremely small, boutique manufacturers and companies that only manufacture automotive chassis.
US automotive manufacturing has traditionally been concentrated in the Midwest. The states with the most automobile manufacturing establishments are California, Michigan, Indiana, Illinois, Ohio, Georgia, Kentucky, Missouri, and Texas.
US-based automakers compete with numerous foreign rivals, including companies such as Toyota, Honda, and Nissan that have extensive auto assembly operations in the US. Together, Ford and GM – the two major US-based light vehicle manufacturers – have a US market share of about 30%. While the US is the world’s second-largest national car market after China, it is mature and slow-growing.
Major sources of imports of cars and trucks to the US are Mexico, Japan, Canada, and Germany. Canada is the largest consumer of US exports. Operating under NAFTA, many US companies assemble autos in Mexico and Canada for sale in the US to take advantage of lower labor costs. Most of the autos imported into the US from Canada and Mexico come from manufacturing facilities owned by US companies.
In Mexico, the industry includes about 20 assembly plants that annually produce nearly 4 million cars and light trucks, according to the Mexican Automotive Industry Association. Major carmakers with plants in Mexico include Nissan, Ford, Volkswagen, Mazda, Honda, GM, Toyota, and FCA. Due to lower labor costs, Mexico has rapidly emerged as an attractive assembly location for global carmakers selling into the North and South American markets, and has captured a greater share of global carmaker investment than the US and Canada. However, carmakers that build vehicles in Mexico that are bound for the US market are under increasing political pressure to keep plants and jobs in the US.
• Regulatory issues and a lack of dealer networks hinders Chinese automakers from entering the US market
• Japanese manufacturers build twice as many cars overseas as they do domestically
• Low market penetration, urbanization, and rising incomes are likely to drive future auto sales in India
The automobile manufacturing industry in Asia/Pacific is primarily concentrated in China, India, Japan, and South Korea. Major companies in China include SAIC Motor, Dongfeng Motor, Chongqing Changan Automobile, and FAW Group. India’s leading domestic companies are Tata Motors and Mahindra & Mahindra. Major companies in Japan include Toyota Motor, Honda Motor, Nissan Motor, Mazda Motor, Fuji Heavy Industries, and Suzuki Motor. South Korea’s auto industry primarily consists of Hyundai Motor and its affiliate Kia Motors.
China is the world’s largest national automotive market in terms of both production and vehicle sales. Its annual sales forecast for 2022 is at 80 million units, down from earlier forecasts of about 82 million units, according to data from JD Power and LMC Automotive. Most foreign investment in China’s auto industry is limited to joint ventures with domestic partners, but that policy is changing.
Most global automakers, including Ford, GM, Daimler, Volkswagen, and Toyota have extensive JV operations in China. However, untangling JV ties – even with the looser regulations – would be complicated and costly. Renegotiating terms of JV in China is complicated as it is uncommon and needs strict compliance with China’s Foreign Investment Law.
China is emerging as a leader in electric vehicle production and technology. To help cement its position in the global battery electric vehicle market, China has made major investments in securing the raw materials to make batteries. China has purchased cobalt mines in Congo to reduce its dependence on other countries for access to the mineral. The move may also make competing countries’ auto industries more dependent on China.
While China’s auto manufacturing industry is fragmented relative to national markets in the US, Western Europe, and Japan, it is fairly concentrated; one company, Shanghai Automotive Industry Corporation has annual revenues of about 750 billion yuan in 2020, according to Statista.
China is a net importer of light vehicles; it is the world’s third-largest importer of motor cars and other passenger vehicles behind the US and Germany, according to the International Trade Centre (ITC). Exports are relatively small. China’s domestic carmakers have ambitious global expansion plans, but currently its exports are mostly to other emerging markets. However, in 2016 the US became China’s top export market amid rising US imports of western-branded vehicles made in Chinese plants. Other top export markets include Iran, Mexico, Chile, Egypt, and Brazil. Difficulties with meeting US regulatory standards, consumer expectations, and in establishing dealer networks have so far hindered China’s domestic auto industry from entering the US market, which many Chinese companies see as a gateway to other developed markets.
Japan is the second-largest producer of light vehicles in the Asia/Pacific region. In 2020, about 7 million passenger cars were produced in Japan, with the total domestic production volume reached more than 8 million units, according to Statista.
However, as a whole, Japanese light vehicle manufacturers build most of their cars in or near overseas markets where they will be sold. In addition to the nearly 10 million vehicles it builds at home, it manufacturers another 18 million in overseas markets, according to JAMA. Major markets for foreign production include Asia (51% of overseas production volume), North America (27%), Latin America (10%), and Europe (9%). About 80% of Japanese companies’ North American production is situated in the US.
As the third-largest national automobile manufacturer in the Asia/Pacific region, India produces more than 4 million light vehicles per year, according to Statista. India’s auto industry consists of about 20 companies, which includes domestic players as well as the subsidiaries and joint ventures of foreign manufacturers, according to D&B India. Passenger car sales are expected to rise more than 10% per year between 2017 and 2020, according to D&B India. India exports passenger vehicles to more than 150 countries. Major export markets include Mexico, the US, South Africa, and Saudi Arabia. Exports to the US began in 2018 with Ford Motors’ EcoSport compact SUV build at Ford’s plant in Chennai, India.
The auto market in India holds long-term growth potential due to low overall market penetration, urbanization, favorable demographics, rising incomes and discretionary spending, more affordable vehicle prices, and an increasing rate of household formations, according to D&B India. India has an “open door” policy toward foreign direct investment in its domestic auto industry, which allows foreign manufacturers to set up wholly owned subsidiaries, as well as joint ventures with local partners. Major companies with assembly operations in India include BMW, Ford, GM, Honda, Hyundai, Nissan, and Volkswagen.
South Korea is the fourth-largest national market for automobile manufacture in Asia/Pacific. Factories in the country built about 1.3 million passenger cars in the past year, according to Statista. Top export markets include the US, Australia, Canada, Saudi Arabia, Germany, and the UK. Rising demand in emerging markets, as well as flagging growth and high labor costs at home have caused South Korea automakers to focus investments on increasing production capacity overseas. This trend is expected to continue as Hyundai and Kia shift more production to lower-cost operations in Brazil, India, and Mexico.
• The EU’s eastward expansion gives automakers access to growth markets and inexpensive labor
• Free movement of goods and people within the EU benefits Europe’s automotive supply chains
• Brexit is creating market uncertainty in the UK
Europe’s automobile manufacturing industry includes over 300 assembly plants in its 27 EU member states, according to the European Automobile Manufacturers Association (ACEA). The industry is concentrated in Germany, Spain, France, the UK, and the Czech Republic. Major companies headquartered in Europe include Volkswagen, Daimler, BMW, PSA Groupe, Renault, and Fiat Chrysler.
Germany is Europe’s largest maker of light vehicles and is the largest EU car market. The country has faced declining car registrations in recent years, due to the ongoing semiconductor shortage. China is the largest foreign production market; other major markets include the Czech Republic, Spain, the US, Mexico, and Brazil. Most exports go to other countries in Europe. The UK is Germany’s largest national export market. Other key markets include the US, China, South Korea, Japan, and Australia.
Germany, France, and Italy are home to major domestic brands, but automotive assembly plants are scattered throughout Western and Eastern Europe. The free movement of goods and people in the EU has benefited Europe’s auto industry and its supply chains. As the EU has gradually expanded eastward, the auto industry has followed in pursuit of growth markets and less expensive labor. However, the Brexit vote has created market uncertainty in Europe amid the possibility of new tariffs on vehicles and parts entering the UK once it leaves the EU. Automobile manufacturers in the UK worry what Brexit means for the industry’s competition.
• Brazil accounts for a wide majority of South America’s light vehicle production and sales
• Rising incomes and low rates of car ownership signal growth opportunities
• Economic conditions are improving, but political uncertainties persist
Light vehicle production and sales in South America are dominated by Brazil. A small number of vehicles are assembled in Argentina. Most of the vehicles made in Brazil are sold there, but exports to other South American countries, primarily Argentina and Colombia, are growing amid better vehicle quality and an improving regional economy. Global carmakers with operations in Brazil include BMW, Ford, GM, Toyota, and Volkswagen.
South America’s automobile market has about 65 million vehicles in 2020, according to Statista. The region has substantial potential for growth the low degree of overall car ownership and higher levels of disposable income relative to some other emerging markets. Mexico and Brazil produce over 3 million and 2 million units in 2020, respectively. However, political uncertainties in the region have the potential to disrupt recent economic gainss.
Middle East & Africa
• Urbanization and infrastructure development are driving demand for cars
• Iran leads the region in vehicle production and sales
• Violent conflict and oil price volatility are holding back industry growth
Light vehicle sales in the Middle East reached just about 2 million units, dropping by more than 30%, according to Statista. Rising urbanization, improving infrastructure, and industrial development are all helping to drive demand. Iran is the region’s top market for vehicle sales, and it manufacturers its own domestic brands. Conflicts in Syria, Yemen, and Iraq, and the resulting refugee crisis, have disrupted trade and tourism in the region and contributed to rising costs for security and services to displaced populations. Oil price volatility, ongoing conflicts, terrorism, and the threat of civil unrest pose significant risks for economic growth and foreign investment.
As a whole, the market for automobiles in Sub-Saharan Africa is relatively small but has potential for significant growth. The region is rich in natural resources, but is vulnerable to swings in commodities prices. China’s slowing economy poses ongoing risks for Africa if commodity exports to China decline.
The US was the largest producer of vehicles in the world in 2003, followed by Japan and Germany. While most vehicles sold in the US were manufactured by the Big Three, foreign corporations such as Japan’s Toyota Motor Company have starting manufacturing in the US and are now an integrated part of the US automobile industry. According to many sources, the extended US operations of foreign based companies now rival those of American automobile manufacturers. For example, Toyota Motor Company now operates twelve manufacturing plants in the US, producing 1.55 million vehicles, 61.66% of the roughly 2.5 million vehicles the company sells in the US each year.
A wide variety of vehicles are manufactured in the United States, from compact cars to full-size luxury vehicles. The American automobile industry itself is probably best known for the manufacture of large cars, leading to the common public perception of American cars being larger than those from other countries and making the US well known for the production of so-called land yachts.
While the denotation of domestic vehicle includes all vehicles made in the United States, the term Domestic vehicle in the United States is usually only applied to vehicles made by the “Big Three” and their traditional marques. The term domestic vehicle does not include vehicles sold under marques who used to be headquartered outside the United States and are now owned by the Ford Motor Company or General Motors. Ironically, vehicles made outside the US by the traditional marques of the “Big Three” are considered to be domestic vehicles, while vehicles made inside the US by foreign manufacturers are not considered domestic, but rather import vehicles.
As with the term, domestic vehicles, there is a legal definition for import vehicles but popular usage of the term, and popular views of what constitutes an “import” vehicle, vary widely.
For the purposes of Federal regulations, such as Corporate Average Fuel Economy (CAFE) and the American Automobile Labeling Act of 1994 (AALA), vehicles produced in the United States, regardless of brand, are considered “domestic”, while vehicles produced outside the United States are considered “imported”.
However, many Americans view a Toyota vehicle made in Kentucky, a Saab built in Ohio, or a Mercedes-Benz vehicle made in Alabama as an “import”, while others view a Pontiac vehicle made in Australia as a “domestic” vehicle. This perception is due to the respective brands’ longstanding association with their parent countries: Toyota with Japan, Mercedes-Benz with Germany and Pontiac with the United States.
The country of origin of any particular vehicle can be easily determined:
The AALA requires that passenger vehicles manufactured after October 1, 1994 must have labels specifying their percentage value of U.S./Canadian parts content, the country of assembly, and countries of origin of the engine and transmission. These are typically part of, or adjacent, to the vehicle’s Monroney sticker.
Each vehicle sold in the United States carries a Vehicle Identification Number, as required by NHTSA regulation — Title 49, Part 565 of the U.S. Code.
The VIN identifies the vehicle’s country of manufacture, and the company responsible for its production. Vehicles manufactured in the United States have VINs beginning with the numbers 1, 4, and 5 — regardless of where the company is based. Thus, a Toyota Camry made in the U.S. will have a 1, 4 or 5 at the start of its VIN, while one imported from Japan will begin with the letter J.
In the year 2000, according to an article in the magazine Motor, BMW attempted to label its “X5” Sport utility vehicle, made in Spartanburg, South Carolina with a VIN beginning with the letter W — indicating the vehicle was made in Germany. A spokesman for the Society of Automotive Engineers, the agency responsible for assigning the three-digit “World Manufacturer Identifier” that begins the VIN label, was quoted as saying “We assign (codes) according to the dirt the plant’s built on, not the headquarters of the company.”
The Big Three
“The Big Three” refers to the three largest automobile manufacturers headquartered in the United States. While there have been roughly 1,800 car manufacturers in the US over the course of the 20th century, only three large corporations with considerable sales numbers were left by the 1980s. The term is applied to General Motors, the Ford Motor Company, and the Chrysler Corporation.
General Motors is the largest automobile manufacturer in the United States and was also the world’s largest for 77 years. However, in 2008, GM was passed by Toyota. GM is headquartered at the Renaissance Center in downtown Detroit, employs approximately 202,000 people, sold 9.025 million cars worldwide, and had a US$ 150.276 billion revenue for the year 2011. The corporation sells its vehicles in the United States under the following divisions and subsidiaries:
Hummer, defunct as of 2010
Pontiac defunct as of 2010
Saturn Corporation defunct as of 2010-11
Oldsmobile defunct as of 2005
Ford Motor Company
The Ford Motor Company (FoMoCo) was founded in 1903 by Henry Ford, and is America’s second largest and the world’s third largest vehicle manufacturer according to total sales volume. In 2005, the Ford Motor Company had a total revenue of $178.1 billion. The corporation sells vehicles under the following brand names and subsidiaries:
Mercury defunct as of 2011
Formed in 1925 by Walter Percy Chrysler, the Chrysler Corporation has since been one of the most important American automobile manufacturers, consistently ranking as the third-biggest for most of the post-war period. The company followed GM’s “move up” model, with the Chrysler brand (and the Imperial brand from 1955–1975) being the flagship luxury make.
In 1998, the Chrysler Corporation officially merged with Daimler-Benz of Germany, into a new entity, DaimlerChrysler (DCX), which is headquartered both in Stuttgart, Germany and Auburn Hills, Michigan (where the pre-merger headquarters of DaimlerBenz and Chrysler, respectively, were located). This raised a dispute on whether Chrysler (or, more specifically, the Chrysler Group within DCX, which consists of most former Chrysler Corporation operations and is headquartered in Auburn Hills) can still be seen as a domestic manufacturer. Nevertheless, the term “Big Three” still applied. Chrysler entered into bankruptcy in 2008, and is now owned by the Italian car maker FIAT and the United Auto Workers Union.
In 2005, the Chrysler Group employed 83,130 people and sold 2.83 million vehicles globally, generating $57.4 billion in revenue. Chrysler manufactures and sells vehicles under the following brands:
Desoto defunct 1961
Imperial defunct 1975
Ram Trucks (formerly Dodge Ram)
Plymouth defunct in 2001
AMC defunct in 1987
Eagle defunct in 1998
SRT as of 2013
BMW opened its American manufacturing plant in Spartanburg, South Carolina in 1994, to manufacture the Z3 roadster, later replaced by the Z4model. Since 2000, the plant also manufactures the X3, X5 and X6 SUV. All those models are made exclusively at Spartanburg for both the domestic market and worldwide exports (not counting CKD operations in some countries).
Fiat returned to the United States market after leaving in the 1980s as part of its partial acquisition of Chrysler. As of December 2011, Fiat sold only the 500 model, which is assembled in Mexico but has an engine manufactured in Michigan.
Honda was the first Japanese automaker to build a factory in the United States. Following the success of the Accord, the company opened a new plant in Marysville, Ohio in 1982 to assemble the model, which went on to become the most popular car in the US in 1989. Honda expanded their operations and the scope of models manufactured in the US, building the Anna engine plant andEast Liberty automobile assembly plant, and in 2001 opening Honda Manufacturing of Alabama in Lincoln. Most models sold under the Honda and Acura brands in North America are currently manufactured in either the U.S. or Canada.
Others, such as the Honda Fit, Honda S2000, Acura TSX, and Acura RL, are imported from Japan. Some vehicles, such as the older CR-V (in the eastern United States) and the Civic SI hatchback, were imported from the UK. Some Accord passenger cars were imported from Mexico and starting from 2008 all CR-V’s sold in the Americas are made in Mexico, in the early 2000s. In 2009, production of 4-door Civic sedans began at a new factory in Greensburg, Indiana.
Hyundai Motor Company started manufacturing in the United States in 2005, when their plant in Montgomery, Alabama started the production of the Sonata sedan. It was joined in 2006 by the new Santa Fe SUV.
Kia Motor Company, a brother company of Hyundai, has built manufacturing plant in West Point, Georgia, which produces Optima sedan.
Ford Motor Company and Mazda Motor Corporation jointly operate an automobile assembly plant in Michigan that currently produces the Mazda6 and the Ford Mustang.
In 1997, a year before the merger of Damiler-Benz and Chrysler, the former Daimler-Benz followed the steps of their Bavarian competitor and opened a plant in Tuscaloosa County, Alabama, to serve as a worldwide production location for the new M-Class. The M-Class has since then been replaced by a new generation and joined by the new R-Class and GL-Class, also manufactured exclusively in Alabama.
Mitsubishi Motors Corporation
Mitsubishi Motors entered the American market through a long-standing partnership with Chrysler Corporation, and later this partnership was extended into a 50/50 joint venture manufacturing operation named Diamond-Star Motors (DSM) in Normal, Illinois. In 1991, Mitsubishi took over Chrysler’s share in DSM and in 1995 renamed it Mitsubishi Motors North America, Inc. (MMNA) Manufacturing Division. The plant has produced a number of Mitsubishi models and their Chrysler, Dodge, Plymouth and Eagle derivatives, and currently manufactures vehicles based on the American-designed PS platform – the Galant, Eclipse and Endeavor. Manufacturing of related Chrysler-branded vehicles was taken over by Chrysler Group, and while other related Mitsubishi vehicles are sold worldwide.
Nissan opened their first factory in the 1980s in Smyrna, Tennessee, joined in the new millennium by another plant in Canton, Mississippi. Most models sold under the Nissan brand in United States, as well as Infiniti QX56, are currently manufactured there. Unlike Toyota or Honda, the company does not have any manufacturing operation in Canada. However, Nissan maintains manufacturing operations in Mexico, from which its smaller U.S.-market cars like the Sentra are imported. Most North American models are specific to this market, although some models, like the Murano and Quest, are exported to other continents.
Subaru teamed up with fellow Japanese manufacturer Isuzu, forming a joint-venture called Subaru Isuzu Automotive to build and operate a manufacturing plant in Lafayette, Indiana. The plant made Subaru cars and Isuzu SUVs mostly for the American market until 2003, when Isuzu, facing faltering sales in America, decided to quit the venture selling their share to Subaru for $1 million. The plant continued to build Isuzu Rodeos under contract until the end of that vehicle’s production run. From then on, the production was limited to Subaru models such as Legacy and its derivatives Outback and Baja, as well as the new B9 Tribeca. The two latter models are only built in Indiana for all markets where they are sold. After Toyota acquired a stake in Fuji Heavy Industries, the parent company of Subaru, it shifted some of the Toyota Camry production to the Lafayette plant.
Tesla is a Silicon Valley-based company that designs, manufactures and sells electric cars and electric vehicle powertrain components. Tesla Motors gained widespread attention by producing the Tesla Roadster, the first fully electric sports car, followed by the Model S, a fully electric luxury sedan. Tesla also markets electric powertrain components, including lithium-ion battery packs, to other automakers, including Daimler and Toyota.
Toyota Motor Corporation
Toyota’s first foray into automobile manufacturing in the United States was NUMMI, a joint venture with General Motors based on the latter’s production facility in California, which started in 1984 and has been manufacturing Toyota models and their versions branded as Geo, Chevrolet and Pontiac until GM withdrew in August 2009 and Toyota shut the doors in March 2010. Toyota went on to establish a number of wholly owned plants in states such as Kentucky, Indiana, California, West Virginia and Alabama. More than half of Toyota-branded vehicles sold in the United States come from American plants. Conversely, all Scions are imported from Japan. Lexus-branded models are imported from Japan or Canada (RX only).
The 2012 Volkswagen Passat is a mid-sized sedan which replaces the previous-generation Passat B6 in the North American market.The model is also shipped overseas to South Korea. The Passat NMS was officially announced in January 2011 at the Detroit Auto Show. Built at the Volkswagen Chattanooga Assembly Plant, the new Passat allows building and shipping costs to be reduced significantly over its predecessor making it more competitive to offerings from competitors at the $20K mark.
Major products are passenger vehicles (about 30% of revenue) and light trucks (over 5%). 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.
In addition to automated assembly processes and supply chain management, computer technology is used extensively for product design. Sophisticated computer modeling programs help with material, fuel efficiency, emissions, safety, and product quality design choices.
Cars with electric rather than internal combustion powertrains are a key area of industry research and investment. However, consumer acceptance of plug-in electric vehicles (EVs) has been lukewarm amid concerns about vehicle range, limited charging station infrastructure, and high sticker prices. To counter these perceptions carmakers have worked to expand?vehicle range, pooled resources to invest in charging infrastructure, and introduced more entry-level models. Fuel cell EVs, which use hydrogen to create electricity through an electrochemical reaction, are also an area of industry focus but model availability is lower than for plug-in EVs. A fuel cell EV’s range is similar to that of an internal combustion engine vehicle, and they can be fueled quickly at a conventional gas station. However, they do face safety challenges for?in-vehicle hydrogen storage.
On-board computers are ubiquitous in today’s cars and trucks. Even modestly equipped economy cars have at least one computer that interprets signals from various sensors in the vehicle’s engine. Computers may also control automatic transmissions, anti-lock brakes, air bags, cruise control, infotainment systems, and other automotive functions. As computing costs have gone down, the technology content in cars and trucks has risen, especially in relation to safety. Recent technologically enabled safety enhancements include tire-pressure monitoring, adaptive cruise control and collision mitigation, blind-spot detection, lane-departure warnings, rollover prevention, and rearview cameras.
In recent years, carmakers have worked to seamlessly integrate consumers’ mobile devices with vehicle infotainment systems. To that end, car companies are increasingly working with technology companies to ensure automotive features are compatible with the most popular computing operating systems. However, as cars have become more connected, keeping them secure from cyberattacks has become a critical issuer.
Advanced sensor-enabled safety features combined with internet connectivity are the bridge technologies that will eventually lead to the commercialization of fully autonomous cars and trucks. While the technology is likely years away from widespread adoption, driverless systems are being developed and tested by most major automakers as well as companies such as Alphabet, Apple, and Uber. Carmakers are also making investments in ride-hailing, trip planning, car-sharing, and other tech-enabled mobility services as a hedge against a future with less car ownership and more shared ridership.
As most automobile manufacturing companies are experiencing supply chain disruptions, the use of 3D manufacturing is used as a solution. The use of 3D printing enables supply chains to recover during demand surges as well as shortages. Developers are incorporating the use of 3D printing with traditional processes to create uniquely combined parts which could perform better and have a lower cost.
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.
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.
In the year 2009, in a largest decline during economic crisis, less than 6 million new passenger cars were sold in the United States, and the total number of new sold and leased cars and light trucks dropped to just above 13 million from a normal pre-crisis level above 20 million (more than 22 million in 2000) according to the U.S. Department of Transportation. This figure “Includes domestic and imported vehicles.” (Department of Transportation) The number of cars sold in the US was decreasing at a gradual yet continuous rate since 2000, when 9 million passenger cars were sold in the US. Looking back at history however, reveals that such decline is only part of normal market trends and most likely only a temporary problem, and after 2009 a strong recovery nearly restored sales and leasing to pre-crisis level in 2013. Overall, 1985 was a record year with cars sales totaling just over eleven million., while light truck represent nearly a half of new vehicle at present (2013), and in 2006 sales and new-vehicle leases for light trucks exceeded the number for cars by 6% (sales only exceeded by almost 12%).
While imports have been gaining ground in terms of units sold during the 2000s and have regained roughly the same market share they held in 1992, the sales of domestic vehicles are still more than double those of imported vehicles. It should be noted, however that the US Bureau of Transportation Statistics “Includes cars produced in Canada and Mexico” as domestic vehicles as both countries are part of the North American Free Trade Agreement (NAFTA), thus including many cars by Asian and European manufacturers – many Volkswagens are made in Mexico,Toyotas in Canada, also. In 2006 the sales of vehicles made in NAFTA states totaled 5.5 million, while the sale of imported vehicles totaled 2.2 million. 923,000 vehicles were imported from Japan, making it the greatest exporter of vehicles to the US. Germany was the second largest exporter of vehicles to the US, with 534,000 units exported to the US in 2006. Imports from all other nations, except Germany and Japan, totaled 729,000.
Independent dealers in local markets are the primary sales and distribution channel. Most car buyers use the internet as a shopping venue, but the dealership is still the primary sales outlet, even if the buyer shops online.
Dealers often enter into multi-year sales agreements with manufacturers. Some dealers have exclusive agreements with a single manufacturer; other dealers represent multiple manufacturers. Manufacturers may impose various operating requirements on the dealer for inventory, working capital, sales practices, showrooms, service facilities, and monthly reporting. Dealers also agree to offer warranty service, parts, general maintenance, and repair of the manufacturer’s products. Most manufacturers require that certified technicians perform this work.
Manufacturers typically own multiple product lines, often marketed under different brands. Brands are targeted to consumers by income, age, and sex by highlighting model characteristics, such as performance, economy, quality, and safety. Ads are delivered primarily by TV, radio, newspaper, and the internet. Manufacturers advertise directly and also support cooperative dealer advertising programs.
Cash flow is somewhat seasonal, as sales are strongest in warm-weather months. Field inventories are carefully tracked at dealer locations to ensure supply and demand remains in balance. Curtailing manufacturing operations quickly as a result of inventory build-up is difficult and expensive for auto manufacturers. Due to intense competition, per-vehicle profits tend to be fairly low. Companies must therefore scale their operations to reduce costs. Building products locally and sourcing from local component suppliers also helps protect companies from currency exchange fluctuations. The industry is capital-intensive: average annual revenue per employee in the US is about $1.5 million.
Trade tariffs can also place manufacturers at a significant advantage or disadvantage over a competitor from a different country when trying to sell into a given foreign market. Major global manufacturers have sought to build factories in foreign markets where vehicles will be sold in order to avoid tariffs.
Manufacturers offer inventory financing to dealers, either through captive lenders such as Ford Motor Credit or Toyota Financial Services, or third-party lenders. These lenders also provide loan services to consumers through manufacturer/dealer arrangements. Most cars are sold on credit.
The global regulatory environment for automakers is extremely complex and varies from country to country, as well as on a local basis within individual markets. Government regulation of the auto industry focuses primarily on five key areas: emissions control, fuel economy, industrial environmental controls, use of chemicals, and vehicle safety.
Amid the auto industry’s rapid growth in emerging markets, the worldwide patchwork of regulations has generally evolved from those established in mature markets, chiefly the US, Western Europe, and Japan.
In the US, the Environmental Protection Agency (EPA) issues emissions standards; Occupational Safety and Health Administration (OSHA) enforces worker safety standards; the National Highway Transportation Safety Board (NHTSB) administers fuel efficiency regulations, determines passenger safety standards, and issues safety ratings. In the European Union, emissions standards are regulated by the European Commission (EC), as well as by agencies within each EU member state. The EC also regulates fuel economy.
China’s emissions regulations combine elements of those in the EU and the US. The more stringent China 5 emissions standards went into nationwide effect in 2017. China’s regulations are slated to get progressively tighter through 2023.
Air pollution in India has also resulted in tougher Bharat Stage (BS) VI emissions standards which take effect in 2020. The new standards are based on the Euro 6 vehicle emission standards.
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