“The auto industry is a huge contributor
to the well being of people and society,
with millions of people living from the
automobile.“ (OICA 2007)
While the vehicle manufacturing industry is an intervened network of mainly powerful worldwide players, there are many other related companies involved. It belongs to the top highest profit business units with a great economical power.
Concerning the OICA, the International Organization of Motor Vehicle Manufacturers, the auto industry’s turnover is approaching €2 trillion, (€ 2,000,000,000,000).
Comparing this turnover of GDP with other economies in the world, the automotive industry by itself would be able to compete with the economical power of countries like Italy, France or the UK.
”If vehicle manufacturing was a country it would be the sixth largest economy in the world” (OICA 2007)
This is a quite amazing fact and shows that the car, which was a rare object not long ago, in the beginning of the 20th century, is nowadays an integrated part of our society and important to many nations as a job giving industry. OICA states that in 2005, the world’s automobile industry made over sixty-six million cars, vans, trucks and buses.
At the same time the term automotive industry covers a broad range. Many business areas are included, starting from the design of a car, the research and development of new techniques, the mechanical development, the individual component production, the factory assembly, the component supply chain and much more sectors, until the sales units bring the car to the end customer and the product reaches the masses.
Even the automotive industry can be described as conservative comparable to other sectors like the Internet it is in many areas, already now in the role of an innovation supporter for many new technologies by enabling them a market and playground of proof.
Driven by customer demands, the automotive industry also a major innovator, investing almost €85 billion in research, development and production. The auto industry plays a key role in the technology level of other industries and of society and is one of the largest investors in Research and Development, with several manufacturers leading the Top 10.For sure the final demands are dictated by the end-customers, but it can be seen that the increase in technological innovation is heavily bound on the customer demanding for different key issues like safety, environmental compatibility, driving comfort, reduced costs etc. which opens the big automotive makers a listening ear to innovation technology.
Building sixty-six million vehicles all over the world in 2006 requires the employment of more than eight million people directly in making the vehicles and the parts that go into them. This is over five per cent of the world’s total manufacturing employment. And the indirect involved people in relating industries that use the busses, trucks and coaches are not included.
Vehicle manufacturers and users are also major contributors to government revenues around the world, contributing over €430 billion in twenty-six countries alone.
It is not easy to make a car, to sell it or even to become part of the big business. A big start-up capital would be required to compete here. So the industry can be seen as closed, but also at the same time facing new challenges to satisfy rapid changes in the customer’s demands and global requirements.
The world is getting globalized and the automotive industry is one of the big players. Their battlefield is the world market. Take a look at the big key player in the picture on the left side and the brands they represent. It is easy to notice, since not so many big players are included in the industry sector. You can see, many brands actually belong to one huge final owner. Now it is easy to understand that, to enter in the sector, a huge amount of money flow and capital investment is required, due to the complex process of building a sellable car and competitors that shoot with atomic bombs and not simple bullets.
(Sorry, but the picture is only available in German language. Red line represent the capital involvement or daugther firms; Green lines show cooperation in component supply and car development)
But playing directly at the front is not required. Also, as a supplier of a major manufacturer a big return on investment can be achieved. Often the return on investment is higher than the constant grow of around 3-9 % in the automotive industry.Suppliers like JOHNSON CONTROLS INC or MAGNA INTL benefit of a growth between 10-40%.
Will there be a stop in the near future of this growth or the supplier market is getting saturated?
No one knows. For sure the OEM market can be seen as saturated already, with the majors car manufacturers battling to keep up with the 3-8%. They give their best to be competitive and push the suppliers to give their best.
To enlarge their market, they are looking for new playground in the globalized world like in India and China and for new innovation technologies. On the other hand, if we individuals are flexible and can adapt to the globalised market, we can also participate and get a piece of the globalized share. For example the India Automotive and Chinese automotive industry is growing in a rapid pace and giving new ground for new markets to conquer.Also in the rest of the world the automotive customers market is demanding for new innovation and inventions, this is no fiction and a huge growth can be seen and is already known of happening.
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