Auto Industry Outlook & Review - June 2012
By Zacks Equity Research | Zacks – Tue, Jun 26, 2012 2:21 PM EDT * Email
The auto industry is highly concentrated. The top-10 global automakers account for roughly 80% of the worldwide production and nearly 90% of total vehicles sold in the U.S.
In January-May 2012, General Motors Company (GM) led with a 17.8% market share in the U.S., followed by Ford Motor Co. (F) with a 15.6% market share, Toyota Motors Corp. (TM) with a 14.5% market share, Chrysler-Fiat with a 11.5% market share, and Honda Motor Co. (HMC) and Nissan Motor Co.(NSANY) at the last spots with 9.6% and 8.1% market shares, respectively.
Due to a massive structural change after the global economic meltdown in 2008, the global auto industry is expected to be ruled by automakers and suppliers based in the six major auto markets: China, India, Japan, Korea, Western Europe and the U.S.
To remain competitive, the automakers will need to design vehicles that will cater to consumers in both mature and emerging markets while manufacturing them at low costs, using the most advanced technology.
The recent trend shows that automakers are concentrating on offering more optional features (to save money on gas), even on the small and less gas-guzzler vehicles, in order to attract buyers. The sale of optional features is helping them offset lower profit margins for small cars relative to large trucks.
The automakers continue to shift their production facilities from high-cost regions such as North America and the European Union to lower-cost regions such as China, India and South America. According to a study by CSM Worldwide, China and South America together are projected to represent more than 50% of growth in global light vehicle production in the auto industry from 2008 to 2015.
The role of governments is highly significant. Governments in all major countries have become active auto industry players. Their energy and environmental policies will be strongly responsible in molding the auto industry in the coming years.
In late 2011, 13 major automakers, including Ford, GM, Chrysler, BMW, Honda, Hyundai(HYMLF), Jaguar/Land Rover, Kia, Mazda, Mitsubishi, Nissan, Toyota and Volvo have signed letters of commitment with the U.S. Government to upgrade the fuel economy standard of cars and light-duty trucks to 54.5 miles per gallon (mpg) by 2025.
The new standard is more than double the Corporate Average Fuel Economy (CAFE) standard of 24.1 mpg. It is expected to save 12 billion barrels of oil and curtail oil consumption by 2.2 million barrels per day, which accounts for half of the oil imported by the U.S. from OPEC countries on a daily basis.
The new standard also aimed at reducing carbon pollution to 163 grams per mile of CO2. With this, more than 6 billion metric tons of greenhouse gases will be curbed over the time span of the program, which accounts for more than the total amount of carbon dioxide emitted by the U.S. in 2010.
Rising fuel prices and global warming have turned attention to the auto industry that either rely less on traditional fossil fuels or use cheaper renewable sources of energy. Thus, "green" alternatives such as fuel-efficient electric vehicles (EVs) and hybrid vehicles will attract consumers in affluent countries while flex-fuels such as ethanol and natural gas will be highly demanded in the emerging auto markets due to their suitability with the local climate and resource base.
Consequently, there will be a variety of powertrain technologies in the auto industry in this decade and "green" cars are likely...
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