Automotive Industry Essay

The Automotive industry is one of the biggest and most important industries in our today’s world. For many people today it is inconceivably to not own a car, since they are depending on it to get to work or several other places like holidays or relatives or even to just make the local shopping trip easier. Within the Automotive industry there are several interesting things to look at. Starting with the history of the industry all the way to looking at modern industries’ leading manufacturers changing the world we live in significantly.

Furthermore there are several interesting aspects regarding the actual product that is provided and how the industry is able to survive and grow effectively. Moreover the Automotive industry despite their enormous growth also had to take a few severe setbacks, which will all be covered in the following essay. These setbacks cause special problems to the industry, which will be carefully investigated. Additionally the paper will cover the size of the five biggest companies within the industry. The sales turnover, number of people employed as well as the capital invested will be demonstrated in this part of the essay. In the last sector the future of the automotive industry will be covered.

The original inventor of the automobile industry can be found in France in the 1860’s who produced the first engines that were capable of producing a “automobile-like” construction. The first people to discover a tremendously cheaper method of creating a car engine were Gottlieb Daimler as well as Karl Benz in the later stages of the 1860’s. The first to mass-produce cars efficiently was Henry Ford in 1914 through using assembly lines. He also made it affordable for people to buy his product through giving them the opportunity to loan money from him in order for the masses to finance his cars. This led to massive increases in auto sales within the United States and built the foundation for a highly successful industry.

The main product that is offered by the Automotive industry of course are cars, which than are partitioned into different categories. One of the categories covers the normal standard sized cars, while there also are Light Commercial Vehicles including all vans that weigh over 3.5 tons and furthermore the even heavier vehicles including buses and trucks. Through providing the car as the product the industry requires the consumer to invest in numerous complementary products.

The price of these complementary products has an impact on the product that is being sold by the industry, which leads to the manufacturers to creating different types of cars. A good example is the difference in car models that are able to burn less fuel than others. Furthermore the service of faster and easier transportation by the car manufacturers is available in different price classes, as there are cars, which are more expensive to buy and drive than others. Many different companies that are joined together under one Mother Company build up the car industry. As shown in Graph 1 the leader of turnover sales in manufacturing cars in 2010 was Toyota followed by General Motors and Volkswagen, while Hyundai and Ford take 4th and 5th place.

Graph1:

All five of the industries mentioned above are one of the world leaders in car manufacturing but have stronger sales in different parts of the world. If we look at the sales turnover of General Motors within the US Market we can see that they have the highest sales revenue within it. The results in other markets differ as the turnover of sales will be much greater for Volkswagen in the European market, since people there are more brand loyal to Volkswagen while in the USA firms like Ford and GM are the most dominant since people are more loyal to the American manufacturer.

Graph 2:

If we take a look at the yearly Sales of Volkswagen and Toyota as shown in Graph 3 below we can see the size these companies have with revenues of millions of Euros/Yen/Dollars, which indicates the size of the companies. The revenues that are being made by the companies is a clear indicator to show their leading role in the car industry. Furthermore the number of employees also matters in indicating the size of a firm. As we look at Graph 5 we can see that Volkswagen had 501.956 employees at the end of 2011. In comparison to that we have Toyota with 317,716, General Motors with 207.000, Hyundai with 80.185 and Ford with 198.000 employees.

This gives another indication about the size the car industry has. All the companies mentioned above are called mother companies sine they own other smaller car manufactures. Volkswagen owns Audi as well as Porsche, Lamborghini, Bentley as well as Seat, which are all owned by the Volkswagen group. Another example of a so-called mother company is Toyota who is the owner of Lexus, Scion, Hion as well as Daihatsu.

Graph 3:

Toyota:

Graph 4:

Graph 5:

There are a few problems concerning the Automobil industry the most vital one being that the global demand for cars has slowed down throughout the financial crisis. There are a few reasons for this to happen. One of the most obvious reasons is the fact that through the financial crisis in 2008 the living standard of many people has changed and there isn’t enough willingness by the consumer to spend money on something that is as expensice as a car. People are struggeling to survive and rather spend the money on the life essential thing as food and drinks.

The fact that there isn’t enough consumer spending brings up another point that is a ahrm to the car industry, since in times of low consumer spending prices are starting to fall. In the case of the automotive industry is a crucial factor due to the fact that people are waitintg for the drop in prices within the industry due to the high original price, which they couldnt efford. A third valid point regarding the problem of a low demand towards cars is the credit crunch happening due to the global recession in 2008, which made it much harder for people to get loans from financial institutions and ultimatley made it more difficult for consumers to purchase a car.

Another problem within the car industry is the fact that there isnt much competition and there isnt much room for new companies to evolve since major companies like crystler, GM or Ford are in a dominant position within the American industry. The only competition the companies are getting within the US market are from oligiopolic companies from other parts of the world. The fact that these companies were able to take over and control other major car manufacturing companies gave incredible power to the mother companies and made it basically impossible for new companies to be successful without being bought by one of the leading firms.

Moreover there has been a change in taste within the car industry regarding cars being environmently friendly as well as making them economically more efficent, which in other words means make the cars use less fuel. This change in fashion came due to the rising oil prices as well as a globally higher awareness of our environment. Consumeres generally also tend to buy rather smaller les luxurious cars since our financial system is just starting to recover from all the setbacks of the past.

All these problems above need to be taken into consideration by the different car companies. Especially the environmental issue is a big problem for car factories, especially since our oil and gas production will eventually find an end, which would lead to a brtual change in car manufacturing. There already are companies which try to be successful through using other kinds of fuel in order to be more environmentally friendly as well as being economically wiser through reducing fuel costs. The car industry tries to achieve that through creating new models based on water or electricity as major fuel, but these contain some problems as well.

A good example for the new problems created would be that the use of water would be much higher if it would be used as major fuel and how long would we be able to do that. Furthermore with electric energy there would be no pollution on one side but on the other side we would support atomic power plants which would continue to do harm to our environment. Additionally there is the idea of hybrid motors, but the efficency of these new teechnological developments has to be questioned. Car manufactureres today have accepted the challenge and contionously come up with new car models that are more environmentfriendly and burn less fuel.

The future of the car industry is dependant on many things as another global financial crisis would shake up the demand for cars again, although it seems to be recovering as of right now. Furthermore the development of technology will play an immense role in which way the car industry will develop. There are new oppurtunities for companies out there to design a new way of transport that will be completely friendly to the environment. Within the near future there will be new technologies tested and improved and it will only be a matter of time until we will see flying cars, which are already existing but dont seem to be profitable enough.

I think that the car industry in China will continue to boom, although they already are leading producers of cars they have the best oppurtunities to advance in technology. Furthermore there will be governmental control about the usage of oil and gas once the ressource becomes less and less avialble, which will then also lead to an increase in technology research based on renewable energy. In the long term it is already safe to say that there have to be significant changes within the car industry in order to counter problems like global warming and the pollution of our environment.

Overall the car industry is a very interestin industry to look at since it has great potential for revenue since almost every human being is dependant on transportation. Although it is a very profitable industry to be in once it was possible to enter and stabalize within the industry on on hand, on the other it has is negative aspects well. Especially looking at the damage that is done to the environment as well as the current global economic situation makes the demand for cars shrink since people are either not willing or able to efford a new car.

Within the industry there are measures to improve the consumers behaviour towards buying cars through coming up with more economically efficent models as well as with models that use different kinds of energy like water or electricity. Another method that is being introduced with successis a hybrid motor although there are still doubts about the efficency. The car industry has potential to remain the most profitable industry of them all, although it will have to go through technological changes in order stay that way.

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