CHICAGO, March 11, 2011 /PRNewswire/ -- Today, Zacks Equity Research discusses the Automotives Energy Industry, including General Motors Company (NYSE: GM), Ford Motor Co. (NYSE: F), Toyota Motors Corp. (NYSE: TM), Honda Motor Co. (NYSE: HMC) and Nissan Motor Co. (Nasdaq: NSANY)
The auto industry is a highly concentrated one, with roughly 10 global automakers accounting for over 77% of total production worldwide. In 2010, General Motors Company (NYSE: GM) led with a 19.1% market share in the U.S., followed by Ford Motor Co. (NYSE: F) with a 16.7% market share, Toyota Motors Corp. (NYSE: TM) with a 15.2% market share, Honda Motor Co. (NYSE: HMC) with a 10.6% market share, Chrysler-Fiat with a 9.4% market share and Nissan Motor Co. (Nasdaq: NSANY) with a 7.8% market share.
The economic downturn provided the impetus for a massive structural change in the auto industry, setting the stage for growth over the next decade. Given the high barriers to entry and the need for scale economies (in operations, supply chain and marketing), the global auto industry landscape is expected to be ruled by global automakers and suppliers based in the six major auto markets -– China, India, Japan, Korea, Western Europe and the U.S.
To remain competitive, automakers will need to design vehicles that meet the requirements of consumers in both mature and emerging markets. Automakers will focus on more user-friendly and low-cost vehicles that are also the most advanced technologically.
The automakers will 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. For example, Greater China and South America together are projected to represent more than 50% of growth in global light vehicle production from 2008 to 2015.
There are two underlying factors behind this location shift in the auto industry. The first is the cost factor. The cost of labor in emerging auto markets continues to be a fraction of that in the developed world. The second is the demand factor. Many low-cost regions, including the emerging auto markets, have high potential for growth. Thus, the shift in auto industry production facilities will lead to a localization of the manufacturing base that will bring down transportation costs.
The emergence of trading blocs is also giving this process a push in the auto market. It is likely that over time there will be fewer car imports from outside a trade zone.
The role of governments must not be overlooked. Governments in all major countries have become active auto industry players. Their environmental policies will be strongly responsible in molding the auto industry in the coming years.
Further, automakers have started to reduce the number of technological platforms with a greater diversity of models produced from each platform in order to remain cost competitive.
For example, Honda, with its flexible common platform, has developed three dimensionally distinct versions of the Accord, allowing for designs where 60% of the components are common. Ford aims to build 680,000 vehicles per core global platform by 2015, up from the current level of 345,000 units.
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