Automotive Industry

INDUSTRY OVERVIEW
The global automotive industry is a highly diversified sector that comprises of manufacturers, suppliers, dealers, retailers, original equipment manufacturers or OEMs, aftermarket parts manufacturers, automotive engineers, motor mechanics, auto electricians, spray painters or body repairers, fuel producers, environmental and transport safety groups, and trade unions.

The automobile and automotive parts & components manufacturers constitute a major chunk of automotive industry throughout the world. The automotive manufacturing sector consists of automobile and light truck manufacturers, motor vehicle body manufacturers, and motor vehicle parts and supplies manufacturers. This sector is engaged in manufacturing of automotives and light duty motor vehicles, motor vehicle bodies, chassis, cabs, trucks, automobile and utility trailers, buses, military vehicles, and motor vehicle gasoline engines.

The Top Automaking Nations
United States, Japan, China, Germany and South Korea are the top five automobile manufacturing nations throughout the world. The United States of America is the world's largest producer and consumer of motor vehicles and automobiles accounting for 6.6 million direct and spin-off jobs and represents nearly 10% of the $10 trillion US economy. Automobile is one of the important industries in the world, which provides employment to 25 million people in the world.

In the recent past, the auto parts manufacturing industry of Midwest lost 12.7% of its employment. The various factors behind this decline are unemployment recession, domestic relocation and foreign competition. This loss in employment has badly affected this industry.



MAJOR MANUFACTURING REGIONS
Northeastern United States and Southern Great Lakes Region, Northwestern Europe, Western Russia and the Ukraine, and Japan are the major manufacturing regions of automotive in the world.

In North America, the prominent automotive manufacturing regions are New England, New York and the Mid-Atlantic, Central New York, Pittsburgh/Cleveland, Western Great Lakes, St. Lawrence Valley, Ohio and Eastern Indiana, Kanawha and middle Ohio Valley, St. Louis, the Southeastern region, Gulf Coast, Central Florida, and the West Coast.

The European Union has the largest automotive production regions in the World. The key automobile manufacturing regions are United Kingdom, Rhine-Ruhr River Valley, Upper Rhine - Alsace - Lorraine region, and the Po Valley in Italy.

In the Western Russian and Ukraine Region, the leading industrial regions are Moscow, the Ukraine region, the Volga region, the Urals regions, and the Kuznetsh Basin Region.

Major Industry Players
The worldwide automobile industry is largely dominated by five leading automobile manufacturing corporations namely Toyota, General Motors, Ford Motor Company, Volkswagen AG, and Daimler Chrysler. These corporations have their presence in almost every country and they continue to invest into production facilities in emerging markets namely Latin America, Middle East, Eastern Europe, China, Malaysia and other markets in Southeast Asia with the main aim of reducing their production costs.

Global Automobiles and Components % Share, (By Volume 2004)

• General Motors - 10.10 %
• Toyota - 7.90 %
• Ford - 7.70 %
• Others - 74.30 %

MAJOR SEGMENTS OF AUTOMOTIVE INDUSTRY
Auto components amount to 31.5% share of the global automobiles and components industry group's value. The global automotive component industry is highly diverse and comprises of various product segments like engine parts, drive transmission and steering parts, suspension & braking parts, electrical parts and other auto components parts.

Engine Parts segment in the automotive component industry comprises of different parts like engine parts, fuel delivery system and productssuch as pistons, piston rings, engine valves, carburetors,and diesel-based fuel delivery systems. Engine parts form one of largest product segment of the automotive components industry and have a production share of 31%. A technology intensive segment, engine parts are moving towards improved designs for optimal fuel consumption and lesser emission. The latest trend in this sector is of outsourcing a part of the engine from vendors.

Electrical Parts segment comprises of generators, starter motors and spark plugs. An important and relatively larger product segment - engine parts are gaining popularity at a faster pace in the global automotive parts & components industry. Electric start mechanism in different scooter and motorcycles is the latest concept in the automobile industry. Electrical parts sector contribute around 9% to the auto components industry.


Drive Transmission and Steering Parts segment has sub segments like gears, wheels, steering systems, axles, and clutches. Having 19% share, this segment is considered the largest product segment after engine parts segment. The emergence of different leading automotive manufacturers is intensifying the competition in the sector especially for products like gears and clutches.



Suspension and Braking Parts segment comprises of automobile components like brakes, brake assemblies, leaf springs, shock absorbers, brake linings. Suspension and braking parts segment has around 12% share in the global auto component industry.




Body and Chassis Parts segment comprises of body and chassis, sheet metal components, and plastic-molded parts. The global sourcing of automotive components comprise of chassis, frames, brakes, steering and much more has reached to US $ 185 billion in 2008-09. This product segment has 12% share in the global automotive component and parts industry.



KEY INDUSTRY DRIVERS
The highlighting features of global automotive industry are:

• Offers support to other industries such as iron, steel, rubber, glass, plastic, petroleum, textiles, oil & gas, paints & coatings, transportation industries.
• Rising foreign investments have led to the rapid growth in terms of automobile production and exports. Overseas companies are making huge investments and are installing extensive production capacities in developing countries.
• Continuous investment in research & development has resulted in increased productivity and better quality automobiles, automotive accessories and parts.
• Increase in standards of living and purchasing power parity have resulted in the increase demand of automobiles especially four-wheelers in developing nations, mostly in South Asian region.
• This sector provides employment to major chunk of human population in the world i.e. 25 million. This industry not only provides millions of jobs to the people, but also produces billions of dollars in terms of worldwide revenues.
• Adequate infrastructural facilities in form of power supply, machinery, capital, ready availability of raw materials and labor help in the tremendous growth of this industry.

FUTURE OUTLOOK
The automotive industry is witnessing tremendous and unprecedented changes these days. This industry is slowly and gradually shifting towards Asian countries, mainly because of saturation of automobile industry in the western world. The principal driving markets for Asian automotive industry are China, India and ASEAN nations.

Low cost vehicles namely scooters, motorcycles, mopeds and bicycles have led to the massive growth of some of the fastest developing economies like China and India. The future of automotive industry in the Asian countries such as Thailand, Philippines, Indonesia, and Malaysia is bright and promising because of the ASEAN free trade area under which the export tariffs are very less.

On a global scale, the assets of the top ten automotive corporations accounts for 28% of the assets of the world's top 50 companies, 29% of their employment and 30% of their total sales. In the year 2006, the United States of America sold around 16 million of new automobiles, Western Europe sold around 15 million, while China and India sold 4 million and one million respectively. Latin America, Middle East, Eastern Europe, China, Malaysia and other South-Asian nations are now emerging as the dominant markets of the automotive industry.

Most of the major automotive players are shifting their production facilities in these emerging markets with the main purpose of gaining better access and reduction in their production costs. There is an estimation that the automotive markets in South America and Asia will witness a boom in the near future. The various factors such as cheap financing and prices discounts, rising income levels and infrastructure developments will assist in the growth and development of automotive sector in the majority of Asian ations.

Market Forecasts
With the upcoming marketing strategies of the manufacturers, the auto parts industry is xpected to have reached a value of USD 586 billion by year 2009. According to reports, the compound annual growth rate of this industry is 2.6% for the period of 2004 - 2009.

Global Auto Components Forecast Value - USD billion 2004 - 2009
Year	USD billion	% Growth
2004	515.5	2.30
2005	526.2	2.10
2006	538.9	2.40
2007	553.4	2.70
2008	569.1	2.80
2009	585.9	3.00
CAGR	2004 - 2009 : 2.6%

It is believed that by 2015, the global auto component industry would reach US$ 1.9 trillion. With different low cost countries emerging at a fast pace in this industry, it is also expected that around 40% of the money will be sourced from such countries. India is one of such low cost countries. At present, it has only 0.4% of the global auto components trade of US$ 185 billion. By the year 2025, it is expected that India might be among the top five auto component economies.