New Car Automotive Industry Growth in the United States in 2018
Despite the growing popularity of trains, planes and even cruise ship transportation in the world, the automobile is still recognized as the most popular form of traveling. During the last decade, there are many advancements in production of cars and the management systems which has greatly revolutionized the automobile industry. Many economies are making huge revenues from the tax generated from various automobile makers. A good example is Ford motor vehicle that in the financial year 2016 generated 150 million dollars in excess in revenue.
The American automobile industry has had immense impact on the domestic economy over the years. It has seen tremendous growth through the years of 20th and 21st century. The milestone steps in the automobile industry are as a result of availability of cheap gas, easy credit and the rising demand for cars by the USA domestic customers. In 2017 only, an approximate of 6.3 million passenger cars were sold in the USA domestic market.
The US has One of the Largest Automobile Markets in the World.
According to Statista.com, the automobile manufacturer approached a market share of 17.6 percent in 2017. This country is recognized as the home for many of the most popular global car and spare parts manufacturers such as Ford which started operations in 1903 to date, Tesla that ventured into this business from 2003 till now and General motors from 1908 to now. There are several other minor manufacturers such as AM General Vehicle Production Group, Faraday, Karma, Lucid and many more.
However, the USA automobile industry is recovering from the automobile industry crisis of 2008 to 2010. Although people argue that the crisis affected the European and Asian automobile manufacturers, the effect of this crisis was felt in the American automobile manufacturing industry. The main reason for this crisis was the substantial increase in prices of automobile fuels. This issues greatly affected the market and therefore led to a decrease in the purchase of Sport Utility Vehicles (SUV). It also affected the national and international demand for pickup trucks which were considered to have low fuel economy.
The comeback of the American big three giant automobile makers Ford, General Motors and Chrysler has greatly helped the automobile industry to recover from the 2008-2010 low season. The companies responded swiftly to the high fuel prices and offered fuel efficient models to customers. The sales began to slide and the industry started to recover.
Many companies in the world as well as those in the US implemented creative marketing strategies on their move to lure reluctant customers. They offered substantial discounts across their product lineups and also provided enticing auxiliary services that led to an increase in the domestic and foreign demand for cars.
On the other hand, the big three car manufacturers in the US faced criticisms for their mix of vehicle models. The criticizers thought that they are ill-suited to a climate of rising fuel prices that struck the automobile industry within the period of 2 years. The customers turned to cheap car imports from leading car manufactures in Asia and Europe such as Toyota, Nissan and many more.
The automobile industry made more sales in 2013, there was a lead in the employability rate in the same year as opposed to the previous time. In the same year, more new vehicles were bought and leased than in any other year. According to a report that was released in 2013, the American car buyers’ registered 15.6 million new vehicles which was a significant increase compared to 2012. 2013 was a year for general motors. There is no other company that sold more cars than General motors. Ford was also a brand that sold more vehicles in the same year. Ford generated three out of every ten sales with the ford series pick-up trucks.
2014 followed and the automobile manufacturers faced the ire of regulators and customers. This was the best year for the American automobile Industry.
High Demand for New Car Vehicles and Donald Trump Effect
According to Autodata, a tracking company in the USA, 16.5 million new vehicles got into the streets of the USA. This was the highest number of sales since the fall in 2008. Several analysts cited several reasons why the automobile industry in the USA is booming. Some of them are the fall in gas fuel, rebounding USA economy, customer confidence in the brands and the quality of US manufactured cars, cheap lease and a great rise in the consumer class due to the improving economy that puts more money in people’s pockets.
Some analysts think that the car industry has reached plateau and there might be no more growth in the coming years. However, the car market is still expanding and more cars are being injected in the market. Ford, FCA US and General motors have more than 200 assembly plants in the USA and therefore they have for years met the market demand for vehicles.
Recently, the Trump effect is surrounding the country again. It is common knowledge that the raw materials for car production is steel and aluminum. Trump has injected stiff tariffs on the imports of these raw materials and this is going to affect the automobile industry. He seeks to introduce a 25% tariff on steel and 10% tariff on aluminum according to a debate that he held with industry executives.
The automobile industry in the USA is at the peak of innovations. There are several initiatives developed through research and development which have greatly transformed the industry. The innovations have helped US automakers to respond to the opportunities and competition of the 21st century from automakers in Europe and Asia.
The automobile spends an aggregate of $105 billion on research and development annually according to the Auto Alliance. In USA only, the automobile industry spends $18 billion annually in research and development. USA is still the automobile giant country that brings stiff competition to Japan, Germany and China. In 2016 only, more than 2.1 million new, light vehicles that were valued at 57 billion US dollars were exported to all corners of the world.
The country is also a leading exporter of automobile spare parts. According to statistics, spare parts valued more than $80 billion were exported in 2016. With as many trucks and cars that are produced in the USA, it is not surprising that the motor vehicle parts formed the top 3 largest exports of the year in 2017. According to Industrial projections, almost 75% of the exports go Canada and Mexico.
Used vehicles form an important component of the USA economy. Demand for USA used vehicles puts pressure on their price in the domestic markets. This is the reason why the price of the new vehicles in the US is squeezed. The price premiums is very narrow and hence it makes it unattractive for US residents to purchase used cars relative to new ones. According to Anecdotal evidence, this is the reason why new vehicles are leading the USA markets. In addition, the country leads the park for the export of used cars especially to middle income countries of Africa and Asia. In 2016, the country exported close to $5.5 billion in used cars.
Employment Rate Rising in Automotive Channel
The sector is also leading in employment rate. In 2017, the motor vehicle parts manufacturing employed close to 600,000 people directly and indirectly. In 2015, there was a study that was conducted by IHS Markit and was released by Motor and equipment manufacturers Association showing that the total employment impact of the automobile parts manufacturers was over 4.26 million jobs both direct and indirect in USA. What this means is that the automobile industry has greatly impacted on the employability of USA graduates.
The USA government is focused on maintaining the health of the auto industry and protect it against global competition. In 2017, the president Donald trump threatened to impose a tax on General motors for importing compact cars from Mexico. He said that General motors was importing the Mexican made Chevrolet tax free. Therefore they have to either make them in the US or face heavy border tax.
In the same year, Ford announced that they will not implement their planned idea of establishing a facility for assembling Ford Focuses. This was a big blow to the economy of San Luis Potosi since it would bring more than 2,800 jobs to the citizens and a vast revenue of $1.6 billion. The company was forced by circumstances to add an additional 700 jobs at a cost of $700 million to a USA based plant in Michigan. The company wanted to expand on the electrified and automated vehicles in the same year.
According to Rebecca Lindland, an analyst for Autotrader and Kelley Blue Book, the Ford decision was fueled by the California’s Zero Emissions vehicle mandate that will be effective from 2018. This mandate says that all the vehicles that will be sold in California from 2018 forward will have zero emissions. Ford responded by investing in electrified and production capability at its Flat Rock, Michigan plant.
How New Car Automotive Dealers Can Combat Low Factory Prices and Profit More
In recent years Dealers have been experiencing a huge cut in sales due to the factories effort to be competitive in a market with smart customers. Access to the internet has give the power back to the consumer when purchasing a new vehicle. Customers are generally tech savvy and will use their mobile devices on the lot to compare pricing with other dealerships. Forcing dealers to match price offers at bottom rate offers. This doesn’t help while you have an economy still growing and looking to save a dollar to two where they can when purchasing a new vehicle. Generally this means take all the extra goodies off the vehicle and leave me with the base model. This is where the dealer tries to make up in finance by selling warranties and paint protection. If you are a dealer who is looking to offer something of value to your clients while ensuring that you make more for your sales team then contact us today at GPS Leaders to learn more about our AVAS New Car Automotive GPS Tracking Program for Dealers.