Global Automobile Industry

- An impact of global distribution of production facilities on costs and market shares

INTRODUCTION

Automobile industry is a symbol of technical marvel by human kind. Being one of the fastest growing sectors in the world its dynamic growth phases are explained by nature of competition, product life cycle and consumer demand

The production of automobiles in volume began in the early 1890s, in Western Europe.

The USA started the production of both electric and gas automobiles by 1896 and in 1903, Ford stepped in. The price of cars reduced from USD 850 in 1908 to USD 360 in 1916. The great depression and the World Wars saw a drop in sale; but the 1950s and 1960s were the glorious era for automobiles (driven by Ford, GM and Chrysler) producing 11 million units in 1970

Ford Motor Company's mass-production model from the U.S. to Western Europe and Japan followed both World Wars I and II. This gives rise to two important trends

1. The advancements in industrialization led to significant increase in the growth and production of the Japanese and German automotive markets.

2. Due to the oil embargo from 1973 to 1974, the export of fuel efficient cars started from Japan to the U.S.

The world automobile industry is witnessing an unprecedented scale of change from the 1990

Leaders in Automobile Industry

According to revenue in FY 2013, the global market leader in automobile industry are

I. Volkswagen AG (16%)

II. Toyota (13%)

III. Daimler (10%)

IV. GM (9%)

V. Ford (9%)

VI. BMW (6%)

VII. Nissan (6%)

VIII. Honda (6%)

IX. Hyundai (5%)

X. SAIC (5%)

XI. Peugeot SA (4%)

Volkswagen AG

16%

Toyota

13%

Daimler

10%

GM

9%

Ford

9%

BMW

6%

Nissan

6%

Honda

6%

Hyundai

5%

SAIC

5%

PAS

4%

Others

11%

SOURCE: STATISTA 2014

Market shares of Automobile Companies

According to Market shares of FY 2013, the global market leader in automobile industry are

I. Toyota Motor Corporation (TM-12%)

II. General Motors Company (GM-12%)

III. Volkswagen AG (VOW-12%)

IV. Hyundai–Kia Group(9%)

V. Renault-Nissan Group(9%)

VI. Ford Motor Company (F-6%)

VII. SAIC Motor Corporation(6%)

VIII. Fiat Chrysler Group(5%)

IX. Honda(4%)

X. Peugeot SA(3%)

Toyota

GM

12%

Volkswagen AG

12%

Hyundai-Kia

9%Renault-Nissan

9%

Ford

6%

SAIC

6%

Fiat-Chrtsler

5%

Honda

Peugeot SA

3%

Others

Source: Bloomberg

Global Automobile Manufacturer Market Shares 2013

Volkswagen (Sales)

To study the impact of global distribution of production facilities we need to understand its effect on particular region and compare it with the whole scenario

The comparison of sales of Volkswagen is shown in the graph

The Global sales of Volkswagen is relatively high as compared to sales in other countries

The sales in china is the highest as compared to other two countries

Analyzing the graph, it can be seen that the Global sales of Volkswagen has gone double compared to the total sales of leading countries

Globally US Japan China

Sales 9700000 611700 67282 3270000

0

2000000

4000000

6000000

8000000

10000000

12000000

Sales 2013

Source: Wall street Journal & JADA

Volkswagen (Revenue)

The revenue of Volkswagen for the FY 2013 is shown in the graph

The total revenue for FY 2013 is € 197 billion

The total is revenue divided into 4 regions from which the Europe and other regions Volkswagen has gained maximum revenue

For Volkswagen going globally has just not benefited the sales but has also increased the revenue

As Volkswagen being a German company, the revenue earned contributes a larger portion to Germany’s national income

197

117.06

35.02

27.43

17.5

0 50 100 150 200 250

Globally

Europe/other

Asia-Pacific

North America

South America

Revenue (in billion euros)

Reg

ion

Revenue in FY 2013

Sales

Source: STATISTA

Contribution of Automobile industry in Economy

o Automobiles represent freedom and economic growth

o It has been a representation of a nation’s manufacturing industry serving the best interests of the nation

o If auto manufacturing were a country, it would be the sixth largest economy

o In 2011-2012, automobile industry contributed about 0.5% to the Australian economy including auto parts manufacturing which is $5.4 billion

o Automobiles are a liberating technology for people around the world. The personal automobile allows people to live, work and play in ways that were unimaginable a century ago.Automobiles provide access to markets, to doctors, to jobs.Nearly every car trip ends with either an economic transactionor some other benefit to our quality of life.

Automobile Industry- An employer

o The world’s automotive industry made over 66 million cars, vans, trucks and buses in 2005. These vehicles are essential to the working of the global economy and to the wellbeing of the world’s citizens. This level of output is equivalent to a global turnover (gross revenue) of almost €2 trillion.

o Building sixty-six million vehicles 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 percent of the world’s total manufacturing employment. In addition to these direct employees, about five times more are employed indirectly in related manufacturing and service provision, such that an estimated more than 50 million people earn their living from cars, trucks, buses and coaches.

o Automobile industry create jobs, jobs and jobs

Source: OICA

Conclusion

o The global auto industry is a key sector of the economy for every major country in the world. The industry continues to grow, registering a 30 percent increase over the past decade (1995-2005) Source: OICA

o There is also an increase in 30% in the production of automobile over a decade (2003-2013), which in turn has not only increased employment but has also increased the revenue of automobile company contributing to the economy of various countries

o Thus the automobile industry is the single greatest engine of economic growth in the world

60663225

87299993

0

20000000

40000000

60000000

80000000

100000000

2003 2013

AUTOMOBILE PRODUCTION

Production Linear (Production)

Source: OICA

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