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International auto industry

发布时间:2017-03-12
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International Auto Industry

There are an estimated 806 million cars in the world. That's a car for almost every seven people in the world. The automobile industry is the third largest industry in the world with an annual production of approximately two million units per year. Cars amount to a lot of countries GDP and total capital. So it is understandable how the recent economic crisis takes such a huge total on the automotive industry. This report will discuss the trends the automobile industry has gone through, the ongoing automobile crisis, the affects of the crisis on major automobile producing countries, and what is believed must be done to recover.

The automobile industry has undergone a number of many trends throughout the years of its existence. In terms of production trends, passenger vehicles have had the biggest jump; from 2002 the number of passenger vehicles produced has jumped almost 40%. Commercial vehicles have also experienced a shot up in production from 2002 with the assembly of 3000 additional more cars per year. Two wheelers have stayed fairly consistent in the past decade, therefore not having an immense influence on the automobile for the past ten years. Three wheelers, shockingly enough, have had a bigger and better influence then the two wheelers, and these three wheelers are only dominantly sold in India! Not so shocking when you come to learn that India is one third of the world's population. DOOOO DOOOO EH?

The bigger you are the harder your fall. All the successes of the automobile industry just make the crisis its going through so much harder to recover from. The global financial crisis in the auto industry began during the last half of 2008. The industry was weakened by the substantially more expensive automobile fuels that are connected to the 2003-2008 oil crises. This created an emphasis and placed a lot of pressure on prices of raw materials which in turn discouraged consumers from the purchase of SUV's and pickup trucks because of their low fuel economy. In the past top sellers in the automotive world were large SUV's, due to the belief that they were safer. Since the price of gas has risen to about a dollar a liter, which makes fueling large vehicles very cost ineffective. People have also considered the opportunity cost of buying eco-friendly cars which don't outweigh the positives, which is the amazing fuel efficiency of hybrid vehicles.

Now, in 2009, automobile corporations all over the world are being hit hard by the economic slowdown across national boundaries. High interest rates, high domestic oil prices and insufficient vehicle financing are continuing to affect the automobile sector as a whole. The decline in economic growth in the industry has further worsened due to the global financial market crisis that caused instability in the stock markets and exchange rates and lack of liquidity for corporations. Car companies are beginning to implement strategic marketing ploys, discount in prime lineups and an increase in hybrid vehicles to attract unwilling and hesitant consumers.

Many countries and their corporations all over the world have seen the effects of the crash, but they have all reacted very differently:

In Japan, major auto corporations have seen great losses. Japans market is an oligopoly. The majors names in the market are Toyota, Honda, Suzuki and a few others, all of whom have reported losses. Toyota reported a double digit loss in sales for a single month and does not expect to break even for the year. Honda has had to cut their racing team; also Honda has had to refinance wages for directors. In Sweden, many major corporations have looked to their governments for help. Both Volvo and Saab have received a bailout valued at 3.5 billion dollars. Although the efforts were fruitless, GM has announced that it will be dropping Saab from their product line which will inevitably reduce sales. In France, sales were below expectations. The French company Peugot, predicted that sales would drop by about 10% but sales actually dropped by about 17%. As a result the company plans to drop about 2,700 jobs.

In contrast China has not felt the effects of this downturn. In fact the automotive industry has been on the rise since the early 1990's. In 2008 China produced a total of 10 million cars, surpassing that of Japan and became number two as the world's automaker. The largest automotive corporation in China: Chery, recorded unprecedented sales after the government lowered automotive taxes. Similar to China, India has not experienced the penalty that the countries above have. India's auto industry during these times has entered the era of globalization due to the favorable environment that is present in the country. Not too long ago, India's auto industry crossed the historic landmark of producing 10 million vehicles in 2006-2007. The Indian auto industry can possibly become one of the largest in the world. Currently, India: - has the second largest two wheeler market in the world, is the fourth largest commercial vehicle market in the world, has produced the eleventh largest passenger car in the world and is expected to be the seventh largest market by 2016. Both the Indian auto industry and supplier industry are highly competitive because of the number of global and Indian auto companies put at play.

What is increasingly clear is that there are many challenges and obstacles that lie ahead for the automobile industry. Many challenges that many automobile companies are confronting are: higher risks across a number of areas ranging from supply chain, currency fluctuations, and labor markets. New opportunities must be seized and surging economies of key emerging markets such as Russia, India and China must be capitalized on. This offers low cost sourcing opportunities and new markets for manufacturers.

The evidence put forth in this report validates the decline in the automobile and something must be done within the industry. The auto sector in the region must come up with its own ways of doing things to remain competitive. Consider the labor shortages and risk, for example: companies are increasing wages to keep the best workers. But this must also be matched by investments in training, technology and development as well as local infrastructure such as secondary education and highways, to keep the sector competitive. Everyone likes to talk about the need for long term investments, but as Jack Welch (former General Electric CEO) famously said, ''You can't grow long-term if you can't eat short-term.''

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