The world's automakers face a rate of change unlike that of any other time in the industry's history. Digitalization, connectivity, evolving powertrain technologies, tougher regulations, and shifts in consumer attitudes have created unprecedented challenges as well as opportunities. In pursuit of sales growth, global automakers have invested heavily in emerging markets, but slower demand, especially in China, has highlighted the risks of these investments. Accurately assessing economic conditions in specific markets has become more important than ever for automakers.
Annual global unit sales of light vehicles, which include passenger cars and light trucks, total about 79 million, according to data compiled by Scotiabank. Industry watchers expect global light vehicle sales to be flat in 2019. Demand in China will lead global growth but is slowing amid a cooling economy. North American demand is expected to dip slightly in 2019, while European sales are expected to remain at 2018 levels. Leading countries for car manufacturing include China, Germany, Japan, South Korea, and the US. Unit sales are highest in China, North America, and Western Europe.
The global auto industry is dominated by a small number of US, Western European, and Japanese companies. In the pursuit of sales and market share growth, the major companies have expanded aggressively into emerging markets by setting up local subsidiaries or joint ventures. Domestic manufacturers in emerging markets often enjoy tax benefits or other policies that give them an advantage over foreign competitors. Manufacturers in emerging markets also have global expansion ambitions and are increasingly exporting their products to both established and other developing markets.
Demand is driven by employment, wage growth, and interest rates. The profitability of individual companies depends on manufacturing efficiency, product quality, and effective marketing. Large companies have economies of scale in purchasing and marketing; smaller companies can compete by focusing on specialized markets.
Developing a Focused Strategy - Amid transformative trends including electric drivetrains, autonomous technologies, vehicle connectivity, mobility services, and emerging global markets, having a cohesive strategy is essential. Trying to do too much to address these trends could be as risky as doing nothing. Industry watchers suggest automakers need to develop and execute strategies that play to core brand strengths while investing in technologies that reinforce and complement those strengths.
Global Flexibility - Shifts in demand, product preference, and regulations can occur suddenly, and in different geographic locations. As carmakers are increasingly global in scale, product development, production, marketing, and supply chain operations need to be agile enough to respond quickly to changes in individual markets.
Optimized Product Mix - Industry insiders suggest the concept of being all things to all buyers is a dated automotive product strategy. Some companies focus more on luxury brands and SUVs, while others may emphasize fuel-efficient, middle-market offerings. Key to success is finding the right blend of products and brands across the various regions in which the company operates.
Companies to Watch:
Ford Motor builds cars and trucks under the Ford and Lincoln brands. The company's Ford Motor Credit division is one of the US's leading auto finance companies. The company plans to pare its car offerings down to the Mustang to focus on trucks, SUVs, and crossovers.
General Motors (GM) makes cars and trucks, with well-known brands such as Buick, Cadillac, Chevrolet, and GMC. In 2017, GM sold its European operations to focus on North America, China, and autonomous technologies.
Honda Motor is Japan's #2 automaker (after Toyota) and the world's largest motorcycle producer. The company also makes a line of ATVs and personal watercraft. Honda's power products division makes commercial and residential machinery, portable generators; and outboard motors.
Hyundai Motors is South Korea's leading carmaker and produces compact and luxury cars, SUVs, minivans, trucks, buses, and other commercial vehicles. The company operates manufacturing plants in China, the Czech Republic, India, Russia, South Korea, Turkey and the US. Hyundai also owns a 34% stake in Kia Motors.
Toyota Motor is among the world's largest automotive manufacturers by revenue and designs and manufactures a diverse product line-up that ranges from subcompacts to luxury and sports vehicles to SUVs, trucks, minivans, and buses. The company is a pioneer in the gasoline-electric hybrid vehicle market.
Volkswagen (VW) is Europe's leading carmaker and second in the world by vehicle sales, after Toyota. VW owns several luxury brands including Audi, Lamborghini, Porsche, Bentley, and Bugatti, as well as Spanish automaker SEAT, Czech automaker Škoda, and commercial vehicle makers Scania and Man.
Products, Operations & Technology
Major products are cars and light trucks. The light truck segment, which includes SUVs, has a higher average price.
Cars and trucks are produced on assembly
Sales & Marketing
Finance & Regulation
Regional & International Issues
Also includes the following chapters:
Quarterly Industry Update
Trends and Opportunities
Call Preparation Questions
Glossary of Acronyms