How Big is the Automotive Industry

So exactly how important is the automotive industry if we include car sales, parts sales, service centers, racing? According to the Alliance of Automobile Manufacturers, in 2015, 50% of all the companies on the Dow Jones Industrial Average rely on cars, automotive transportation, or trucking for revenue. That’s a huge part of the US economy; but how true is that statement? The automotive industry has always been leading in innovation since the late 1800’s. Ever since then, cars have been improving in every way, from safety to speed. The automobile also created an industry entirely dedicated to providing service for cars; from the tools required to repair them to parts to be added on after manufacturing to improve the car. And nowadays with the globalization of the economy, trading cars and parts have become a hot political topic and created a massive lobbying structure in the US government to protect the industry.

In 2015, the numbers of cars sold hit a new record (17.5 Million), breaking the previous record of 17.4 million in 2000.In Europe, the same year, 12.6 million vehicles were sold. The average cost of a new car was $33,560; that is an average revenue of $587 billion a year in the US alone. Globally, 88.6 million vehicles were sold in 2015, with the average global cost of a new car being $23,600, making total sales of new cars globally totaling $2.1 trillion  in new car sales alone.

Shipping brings even more value to the nation’s economy from the automotive industry. In 2015, the total US freight cost from trucking totaled $726.4 billion gross. In the US, 3.4 million trucks essentially run non-stop and burn 38 billion gallons of diesel to move goods all around the nation. But once again, trucking created thousands of other jobs: jobs to maintain the massive infrastructure of highways snaking all around the nation, companies that build, repair, and sell the semi-trucks, and even local shipping companies like UPS and FedEx all rely on the constant demand for shipping in the US. All of this comes down to the main supply of trucks to the US shipping companies that handle freight across the US.

Servicing the massive number of vehicles on the US roadways is also a large generator of revenue for the US economy. With over 260 million cars on the road, where the average age of those cars are 11 and a half years old, there is a large demand to keep those cars running. The average age for those cars are only rising too, and the older the car, the more repairs it will need. The automotive repair industry is estimated to generate $63 billion annually. However, that number is most likely understated as many of the “mom and pop” auto shops are not accounted for in those sales. Companies that add aftermarket parts to improve these cars are also most likely not included. In this market, no company controls more than 10% of the market share for automotive repairs, creating a very competitive market.

Companies that create and develop aftermarket parts create many jobs for the US economy; especially for people with engineering and research background who develop and design these parts. Most of the parts either fall into two categories: engine performance and body work. People work for essentially every car in the market to find ways to further develop parts that will still fit and work with the already designed car, engine, whatever the new part is intended to change. One of the largest aftermarket producers is Centennial Tires, with other producers including Bridgestone, Mahle, Honeywell, Eaton, to only list a few of the hundreds of producers. The Automotive Aftermarket Suppliers Association (AASA) acts as a sort of governing body over these companies. Along with 4 total associations, they fall under the Motor and Equipment Manufacturers Association (MEMA). These groups work together to provide opportunities for parts producers along with lobbying to help protect this industry. The aftermarket industry is estimated to be valued at over $318.2 billion and employs over 4.2 million people.

All of these different sections are only a small part of the massive umbrella of the automotive industry. This industry is one of the largest in the US and brings a huge amount of profit to the US. America has been a leader in automotive innovation. With a huge backing by American and global consumers, it doesn’t seem that the industry is going anywhere soon. However, with the development of EV’s and driverless cars over the recent years, there will definitely be some major changes to how people all over the world use transportation.


Sources:

Blog-admin. "Auto Parts Marketing: Online Parts Sales to Reach $7.4 Billion in 2016." Hedges & Company Blog. Hedges & Company Blog, 01 Feb. 2017. Web. 11 July 2017.’

Akshay Singh, Evan Hirsh, John Jullens, Reid Wilk. "2016 Auto Industry Trends." Strategy& - the Global Strategy Consulting Team at PwC. N.p., 15 Mar. 2016. Web. 11 July 2017.

"Economy." Alliance of Automobile Manufacturers. N.p., n.d. Web. 11 July 2017.

WardsAuto. "Average New-car Price Climbs over $20,000." News & Analysis Content from WardsAuto. N.p., n.d. Web. 11 July 2017.

Lutz, Hannah. "Global Sales Will Hit 88.6 Million in 2015, Pushed by U.S. and China, IHS Predicts." Automotive News. N.p., n.d. Web. 11 July 2017.

"Reports, Trends & Statistics." American Trucking Associations. N.p., n.d. Web. 11 July 2017.

China's Historical Government Part 3

Cap and Trade or Carbon Tax? Which will you decide?