33611B SUV & Light Truck Manufacturing in The US Industry Report
33611B SUV & Light Truck Manufacturing in The US Industry Report
33611B SUV & Light Truck Manufacturing in The US Industry Report
Industry Definition Companies in this industry manufacture (CUVs). They also manufacture light
light trucks and utility vehicles such as truck and utility vehicle chassis. This
vans, pickups, sport-utility vehicles industry excludes the manufacturing of
(SUVs), and crossover-utility vehicles cars and motorcycles.
Industry at a Glance
SUV & Light Truck Manufacturing in 2017
$9.4bn $32.2bn 59
Revenue vs. employment growth Per capita disposable income
Market Share
Ford Motor 40 4
Company
14.8% 20 2
% change
% change
General Motors 0 0
Company
12.4% -20 -2
Fiat Chrysler
Automobiles NV -40
Year 09 11 13 15 17 19 21 23
-4
Year 11 13 15 17 19 21 23
9.9% Revenue Employment
Toyota Motor SOURCE: WWW.IBISWORLD.COM
17.3%
Key External Drivers SUVs
Regulation for the
automotive sector
Per capita disposable
income
World price of crude oil
50.9%
CUVs
Trade-weighted index
Yield on 10-year
Treasury note
26.7%
Pickup trucks
p. 4
SOURCE:
SOURCE: WWW.IBISWORLD.COM
WWW.IBISWORLD.COM
FOR ADDITIONAL STATISTICS AND TIME SERIES SEE THE APPENDIX ON PAGE 34
Industry Performance
Executive Summary | Key External Drivers | Current Performance
Industry Outlook | Life Cycle Stage
Executive The SUV and Light Truck Manufacturing five years have significantly influenced
Summary industry is expected to continue manufacturer operations. For example,
improving over the five years to 2017. there have been updates in the Corporate
Heavy buying activity from key Average Fuel Economy (CAFE)
downstream markets and general regulations, requiring that an average
improvements in the domestic economy 54.5 miles per gallon fuel economy for
are anticipated to bolster revenue growth. large light trucks and SUVs be met by
Moreover, companies that restructured model-year 2025. While this would
prior to the five-year period, such as GM, increase costs in the short-term, it would
are now better prepared to compete on a ultimately increase demand in the long
global scale. Additionally, automakers run. However, in 2017, the Trump
responded to consumers’ environmental administration announced it would
concerns by offering expanded hybrid reopen a review of the light-duty vehicle
and crossover-utility vehicle (CUV) lines. regulations in response to many concerns
from auto manufacturers. This review
could reverse or lessen the current
Thegovernment, as well as many automakers, standards for automakers, which will
are increasingly considering consumer most likely shake up the industry.
Over the next five years, automakers
concerns regarding fuel economy will focus on producing CUVs and trucks
with an emphasis on improved fuel
As a result, the popularity of hybrids and efficiency to meet regulatory mandates. To
CUVs supplanted most sport-utility meet these fuel-efficiency standards,
vehicle (SUV) demand; CUVs are industry operators are expected to provide
expected to account for 50.9% of all additional powertrain options, including
revenue in 2017. Over the five years to clean diesel and hybrids. However, rising
2017, the strong improvement is expected oil prices are expected to threaten demand
to lift revenue at an annualized 8.2% to for industry products, as they often are
$195.5 billion, with an estimated 3.2% less fuel efficient than smaller passenger
increase in 2017. cars and sedans. Nevertheless, rising
The government, as well as many disposable income is forecast to propel
automakers, are increasingly taking industry revenue higher. As a result,
consumer concerns regarding fuel industry revenue is projected to grow at an
economy into consideration. Therefore, annualized rate of 2.1% to $217.2 billion
major government programs in the past over the five years to 2022.
Key External Drivers Regulation for the automotive sector production costs will outweigh the
Profitability in this industry is negatively benefits of catering to changing consumer
affected by fuel-efficiency standards and preferences. Regulation for the
the costs manufacturers incur to reach automotive sector is expected to increase
them. Automakers incur costs through in 2017.
research and development on new
technology, expensive manufacturing Per capita disposable income
processes and fines for not complying Per capita disposable income determines
with government standards. While the price range of a consumer’s vehicle
consumers are leaning toward purchase and what kind of vehicle a
environmentally friendly vehicles, higher consumer can afford. Per capita
Industry Performance
Key External Drivers disposable income is expected to increase competitive. An appreciation of the US
continued in 2017, representing a potential dollar typically leads to a fall in exports,
opportunity for the industry. which has a negative effect on industry
revenue. The trade-weighted index is
World price of crude oil expected to decrease in 2017.
The price of gas is a significant part of a
vehicle’s running costs. Light trucks and Yield on 10-year Treasury note
SUVs are particularly fuel-inefficient, Interest rates influence auto and lease
making them more sensitive to higher costs and therefore have a direct effect
gasoline prices. The world price of crude on consumers’ ability to purchase
oil is expected to increase in 2017, posing vehicles. When interest rates are
a potential threat to the industry. relatively low, consumers are able to
finance vehicles at a more affordable
Trade-weighted index rate, thus driving demand. The yield on
Exchange rates play a significant part in the 10-year Treasury note is expected to
the industry’s ability to remain increase in 2017.
4 105
100
2
95
% change
Index
0
90
-2
85
-4 80
Year 11 13 15 17 19 21 23 Year 09 11 13 15 17 19 21 23
SOURCE: WWW.IBISWORLD.COM
Industry Performance
% change
Nevertheless, heavy buying activity from 0
key downstream markets is expected to -20
help revenue expand over the five years
to 2017. IBISWorld expects industry -40
revenue to increase at an annualized rate -60
of 8.2% to $195.5 billion over the five- Year 09 11 13 15 17 19 21 23
year period, bolstered by rising Revenue Exports
disposable incomes and low interest SOURCE: WWW.IBISWORLD.COM
International trade Over the five years to 2017, domestic seek more favorable markets abroad.
auto manufacturers have worked on Moreover, the North American Free
building back the large international Trade Agreement boosts export figures;
presence that was tarnished during the in particular, trade with Canada has
economic downturn. IBISWorld expects comprised the majority of exports over
industry exports to rise, growing at an the past five years. Imports are also
annualized rate of 0.3% to $32.2 billion expected to grow, lifted by rising
over the five years to 2017. Falling disposable incomes and low interest rate
domestic demand for light trucks and levels. IBISWorld expects imports to
SUVs caused manufacturers to re- grow at an annualized rate of 5.0% to
emphasize their export segment and $122.7 billion in the five years to 2017.
Government Prior to the five-year period, the US reduction in demand. Nevertheless, mere
intervention government approved a bailout of months after the second bailouts, GM
cash-strapped General Motors (GM) and and Chrysler both filed for bankruptcy,
Chrysler. A second bailout was approved and in June 2011, Chrysler was bought
in early 2009 as both companies out by Italian automaker Fiat and
continued to struggle with a severe emerged from bankruptcy.
Industry Performance
Government Although these events took place United States more affordable two-tier
intervention outside of the five-year period, they wage structure. In this structure, entry-
illustrate the government’s support for level employees earn a lower wage than
continued
the automotive industry and its emphasis veteran employees performing the same
on maintaining domestic manufacturing job. Consequently, while many
facilities. As a result, this has spurred automakers have moved operations
increased reshoring activity. Another abroad, reshoring has helped prevent
factor driving reshoring activity is the more significant establishment declines.
Industry Performance
Industry Performance
Industry Performance
Life Cycle Stage Demand for light trucks is recovering
from a low recessionary base
Brand consolidation and vehicle
phase-outs are common
New engine technologies are increasing
demand for trucks and SUVs
10
SUV & Light Truck Manufacturing
Quantity Growth
Many new companies;
minor growth in economic
importance; substantial
5 technology change
-5 Decline
Shrinking economic
importance
-10
-10 -5 0 5 10 15 20
% Growth in number of establishments
SOURCE: WWW.IBISWORLD.COM
Industry Performance
Industry Life Cycle The SUV and Light Truck Industry output has increased due to
Manufacturing industry is in the overall economic improvements and rising
mature stage of its life cycle. Its consumer confidence. Additionally, the
Thisindustry industry value added (IVA), which price of steel declined significantly in the
is M
ature measures the industry’s contribution to past five years, leading to increased profit
the overall economy, is expected to margins. However, many companies
grow at an annualized rate of 11.6% in restructured their business models during
the 10 years to 2022. In comparison, the past 10 years, which contributed to the
the US economy is expected to grow at industry’s stagnant growth in domestic
an annualized rate of 2.0% over the establishments. Moreover, the industry
same 10-year period. Although the SUV experienced major mergers and
and Light Truck Manufacturing acquisitions as a result of restructuring.
industry is expected to grow at a higher Nevertheless, automakers are looking
rate than the overall economy, this is toward development of automated
primarily due to the industry coming off technological operating processes that will
a low base and subsequently rebounding help cut costs and make manufacturing
as economic conditions improved. more efficient.
Products & Services This industry produces vans, trucks and the five-year period altered consumer
sport-utility vehicles (SUVs). The preferences for large vehicles with poor
automotive marketplace is one of fuel economy. Standard SUVs suffer from
constant change and innovation that very low gas mileage comparable with
continuously creates new product that of a full-size pickup truck. High gas
platforms. IBISWorld segments industry prices caused a rapid shift in the
product types into three main categories: popularity of SUVs, and the vehicles
vans, trucks and SUVs, each consisting of became less popular. To combat this
two subcategories. trend, many automakers began
implementing new, hybrid drivetrain
SUVs and CUVs technologies in SUVs to help raise fuel
SUVs are fully enclosed vehicles similar economy. However, gas prices started to
to station wagons but built on a light fall in 2013 and are expected to continue
truck chassis. These vehicles, such as the declining at an annualized rate of 13.1%
Jeep Wrangler, were originally known for in the five years to 2017. As a result,
their excellent off-road capabilities. demand for larger vehicles, such as SUVs
Rising gas prices during the early part of and light trucks have gained steam and
17.3%
SUVs
50.9%
CUVs
26.7%
Pickup trucks
Products & Services known as minivans, are geared to Toyota maintain a large share of sales,
continued transport six or more people comfortably, with the Honda Odyssey and Toyota
and are particularly popular with taxi Sienna leading the way.
services and suburban families. Minivans Vans are large, boxy vehicles designed to
are equipped with relatively small carry as many passengers or as much cargo
engines, offering good fuel economy as possible. Cargo vans come equipped
relative to the size and passenger capacity with two seats in the front of the vehicle,
of the vehicle. Minivans, unlike SUVs or with the rest of the space left empty for
trucks, are typically front-wheel drive, cargo. This type of van is popular with
and this arrangement reduces weight by small businesses and transport services.
eliminating the need for a differential, Passenger vans typically come equipped
but offers less desirable handling with three to four rows of bench seating
characteristics. This segment has behind the driver. Over the five years to
gradually shrunk in light of the 2017, this segment is expected to decline as
popularity of CUV and small SUV a share of overall revenue due to
models. Japanese automakers Honda and competition from SUVs and CUVs.
Demand Gasoline prices, disposable income, success. These early hybrid truck models
Determinants vehicle affordability and interest rates provided limited fuel economy benefits
influence demand for trucks and sport- at an expensive premium over
utility vehicles (SUVs). This industry’s conventional models. Currently,
products are heavily used by small and Companies in this industry are seeking
large businesses, particularly in the to limit risk from high gasoline prices by
construction and agriculture sectors. offering more fuel-efficient diesel and
Demand from businesses tends to be hybrid trucks.
reliable and frequent, despite their Vehicle affordability, disposable
sensitivity to business cycles. income and interest rates influence truck
Additionally, qualitative factors, such as sales by affecting consumer purchasing
consumer preferences, can shift demand power. When interest rates are relatively
to and from other automotive industries. high, consumers’ cost of leasing vehicles
Gasoline prices have a particularly increases. The more expensive a vehicle
strong relationship with truck sales, as is relative to the purchaser’s disposable
trucks are particularly fuel-inefficient income, the less likely a sale.
vehicles. Volatile gasoline prices and American consumers have been
rising concern over climate change has changing their automotive preferences
curbed consumer sentiment for larger rapidly since the recession. For much of
vehicles and made fuel efficiency a high the decade, fuel prices were low, enabling
consumer priority. In turn, industry Americans to become accustomed to
operators such as General Motors driving large vehicles. However, the rapid
introduced hybrid powertrains for some escalation of gasoline prices caused a
truck and SUV models, but with limited major shift toward smaller vehicles.
16.5%
Exports
33.8%
Automobile dealers
$ billion
and Canada, which enables manufacturers -50
Imports in the to maintain many facilities on either side of
industry are H igh the border. These strategic manufacturing -100
and I ncreasing locations helped boost export figures over
the past five years. General Motors’ (GM) -150
ownership of Opel, a Germany-based Year 09 11 13 15 17 19 21 23
automaker, accounts for much of the Exports Imports Balance
shipments to Germany. There, GM vehicles SOURCE: WWW.IBISWORLD.COM
12.2%
Germany
5.8%
Mexico
24.4%
Canada
11.8%
Germany
30.3%
Canada 16.2%
Mexico
22.4%
China
29.7% 23.8%
Other Other
23.4%
Japan
West
AK
0.0 New
England
ME
Great Mid- 0.0
Lakes Atlantic 1 2
NY 3
WA MT ND 1.3
5 4
1.3 1.3 MN
Rocky
1.3 1.3
WI
OR Mountains SD
0.0
Plains 2.6 MI
7.9
PA
0.0
6
7
1.3 ID IA OH 9 8
0.0 WY 5.3
1.3
NE
0.0
IL IN WV VA
6.6 7.9 1.3
West NV
1.3 0.0
KY
UT MO
5.3 NC
1.3
0.0 CO KS 4.0 2.6
2.6 1.3 TN
SC
Southeast
1.3
CA 2.6
11.8
OK AR GA
0.0 0.0 AL 1.3
AZ MS 5.3
1.3 NM
0.0 Southwest 0.0
TX LA
0.0 FL
6.6 5.3
West
HI
0.0 Additional States (as marked on map) Establishments (%)
1 VT 2 NH 3 MA 4 RI Less than 3%
0.0 0.0 0.0 0.0 3% to less than 10%
10% to less than 20%
5 CT 6 NJ 7 DE 8 MD 9 DC
20% or more
0.0 3.9 0.0 1.3 0.0
SOURCE: WWW.IBISWORLD.COM
%
California is home to the American
headquarters of many Japanese and 10
Korean automakers. Moreover, Asian
automakers typically import near- 0
complete vehicles from overseas factories
West
Great Lakes
Mid-Atlantic
New England
Plains
Rocky Mountains
Southeast
Southwest
and perform final assembly there.
California benefits from this as it is
geographically closer to Asia compared
with the east coast. California is expected Establishments
to account for 11.8% of industry Population
establishments in 2017.The Southeast SOURCE: WWW.IBISWORLD.COM
Competitive Landscape
Market Share Concentration | Key Success Factors | Cost Structure Benchmarks
Basis of Competition | Barriers to Entry | Industry Globalization
Key Success Factors Product portfolio matches Access to the latest available and most
customer demand efficient technology and techniques
Consumers’ vehicle preferences are The most successful manufacturers use
IBISWorld identifies subject to radical change from year to the most advanced manufacturing
250 Key Success year. SUVs began losing favor before technologies. In particular, a high
Factors for a 2007 due to rising gas prices. level of automation and quality control
business. The most Manufacturers dedicated to research and is necessary.
development to enhance their product
important for this
line succeed among consumers. Optimum capacity utilization
industry are: Manufacturers with high levels of idle
Flexible cost structures production capacity will have difficulty
Widespread and powerful unions make making a profit. Successful
labor expenses highly rigid in this manufacturers need to constantly align
industry; this inflexibility makes it capacity to market demand.
difficult to operate profitably when
demand falls. Development of new products
Manufacturers must constantly
Establishment of export markets introduce new products or change
Emerging markets are expected to existing products to maintain consumer
account for an increasing share of interest. In recent years, new models
global automotive demand. Successful such as CUVs and crossovers along with
manufacturers need a foothold in enhanced hybrid drivetrains have
such markets. garnered large consumer attention.
Competitive Landscape
Average Costs of
all Industries in Industry Costs
sector (2017) (2017)
100
7.3 4.8 n Profit
4.0 n Wages
11.8 n Purchases
80 n Depreciation
n Marketing
n Rent & Utilities
n Other
Percentage of revenue
60
55.6 75.4
40
2.5 0.5
20 2.2
0.7 2.2
19.7 2.2
10.7
0
SOURCE: WWW.IBISWORLD.COM
Competitive Landscape
Cost Structure inflated in this industry at more than market trucks and SUVs with lower
Benchmarks $80,000.00. The long-term relationship prices or higher quality than those from
between the automakers and the United unionized competitors.
continued
Auto Workers (UAW) union, which
remains in question, will play a Research and development
tremendous role in the future cost and other costs
structure and success of this industry. Other costs associated with this industry
High labor costs (guaranteed under include research and development and
union contracts), along with other general machine and building
factors, have historically been a major maintenance. Industry operators have
impetus to poor short-term management increased research and development
decisions. For example, US automakers costs to 6.2% of industry costs as they
began to rely on truck and SUV sales look to innovate more quickly and
because of their higher gross margins to efficiently than their competitors.
counteract inflated labor costs. Innovation includes both updating
Manufacturers that continue signing product lines with new technologies to
labor contracts favoring the UAW will maintain consumer interest and updating
struggle to compete with nonunion production process technologies to
manufacturers that can offer mass- reduce operating and wage costs.
Competitive Landscape
Competitive Landscape
Industry automakers. For example, Ford has a The three domestic manufacturers are
Globalization stake in Japan’s Mazda brand. GM had extensive users of globalized supply
formerly owned Swedish car chains. Virtually all vehicles manufactured
continued
manufacturer Saab before selling it in domestically have a significant number of
2010. GM still maintains ownership of components manufactured in Mexico,
German car company Opel along with Canada, Japan or China. These foreign
its subsidiary British brand Vauxhall. facilities are usually owned by
These subsidiaries are prime targets automakers themselves or affiliate
for asset sales in the wake of suppliers. As emerging markets grow, a
automaker bankruptcies and poor larger share of automotive activity will
sentiment among domestic consumers. take place abroad.
International trade is a Trade Globalization Going Global: SUV & Light Truck Manufacturing
major determinant of 2005-2017
an industry’s level of
200 Export Global 200 Export Global
globalization.
Exports offer growth
opportunities for firms. 150 150
Exports/Revenue
Exports/Revenue
Major Companies
Ford Motor Company | General Motors Company
Fiat Chrysler Automobiles NV | Toyota Motor Corporation | Other Companies
53.9%
Other
Fiat Chrysler Automobiles NV 9.9%
Ford Motor Company 14.8%
SOURCE: WWW.IBISWORLD.COM
Player Performance Ford Motor Company is one of the portfolio in domestic markets rather than
largest auto manufacturers in the world. developing market-specific vehicles. Ford
The company is based in Dearborn, MI, has also introduced turbocharged and
Ford Motor a suburb of Detroit. Ford produces hybrid drivetrain offerings in the United
Company vehicles under the Ford and Lincoln States, such as the 2012 Ford Escape
Market share: 14.8% nameplates and operates in the same Hybrid SUV. Additionally, the
regions and market segments as its rival, introduction of the Ford Flex crossover-
Industry Brand Names
General Motors. Ford generated global utility vehicle (CUV) is emblematic of
Ford
revenue of $151.8 billion in 2016 (latest Ford’s new accelerated development
Lincoln
data available). initiative. The Ford Flex is a large CUV
Prior to the five-year period, Ford was that provides seating for seven and
the only domestic automaker to emerge maintains the fuel economy of a much
from 2009 without taking federal bailout smaller vehicle. In addition, Ford
funds or entering bankruptcy. Since then, recently introduced reduced-
Ford has focused on restructuring its displacement turbocharged engines
operations, aptly calling its restructuring under the EcoBoost brand for most of its
program One Ford. Under the plan, Ford vehicles. EcoBoost engines reduce fuel
has reduced domestic production consumption by about 15.0%, but
capacity, accelerated new vehicle maintain a similar performance to larger
development and avoided redundancies. engines. Moreover, in 2015, Ford
Ford has broken away from industry released an F-150, the nation’s bestselling
norms by using its global product vehicle, with an aluminum frame. Ford is
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
Major Companies
Player Performance using aluminum instead of steel to end, revenue from Ford’s US light truck
continued decrease the vehicle’s weight, and and SUV manufacturing segment is
therefore increase fuel economy. expected to increase at an annualized
rate of 10.1% to $28.9 billion over the
Financial performance five years to 2017, bolstered by strong
One Ford helped the company sales of its F-150 pickup. Additionally,
experience strong results. In the light in 2016, Ford announced it will launch
truck and SUV segment, Ford’s revenue four new SUVs in response to the
grew at double-digit rates in 2013 and growing popularity of SUVs and
2015. These strong postrecessionary crossovers. Asa result, industry-
years have helped alleviate the turmoil relevant revenue is expected to
from the economic downturn. To this continue rising at strong rates.
Player Performance General Motors Company (GM) is one of reduced labor costs, GM can now
the world’s largest automakers and the produce small vehicles and more fuel-
largest domestic manufacturer of light efficient trucks profitably. Furthermore,
General Motors trucks and SUVs. GM is one of the Big the development of new products has
Company Three domestic automakers based near become the top priority. For example,
Market share: 12.4% Detroit. GM operates manufacturing GM introduced the fuel-efficient
facilities and distribution networks in Chevrolet Sonic and the Buick Verano
Industry Brand Names
Europe, Asia, Africa, Australia, North luxury car in the United States for model
GMC
America and South America. In 2016, GM year 2012, hoping to bring consumers
Chevrolet
generated $166.4 billion in revenue from its back to its small car and sedan segments,
Cadillac
global operations (latest data available). which are excluded from this industry.
Buick
Prior to the five-year period, GM filed Each future product line will embrace
for bankruptcy and experienced advanced technology for an enhanced
multibillion-dollar losses. The company’s overall driving experience for the
bankruptcy led to restructuring that consumer. In addition, the new GM has
eliminated plant assets and workforce. far fewer brands and fewer rebranded
With optimized production capacity and vehicles than before; Pontiac, Saturn,
*Estimates
SOURCE: IBISWORLD
Major Companies
Player Performance Hummer and Saab have been at an annualized rate of 5.3% to $24.2
continued decommissioned or sold off. Trucks and billion. This manufacturing segment has
SUVs will primarily carry GMC or continued to improve, experiencing steady
Chevrolet branding with a few luxury growth throughout the five-year period.
models for Cadillac and Buick. GM expects further growth as the company
enhances research and development to
Financial performance broaden its product lines to satisfy
Over the five years to 2017, revenue from consumers. This strategy is expected to
GM’s US light truck and SUV help the light truck and SUV segment post
manufacturing segment is expected to grow revenue growth of 3.3% in 2017.
Player Performance Formerly Chrysler Group LLC, Fiat 1998 to 2007, Chrysler was a subsidiary of
Chrysler Automobiles NV (FCA) was DaimlerChrysler AG (now Daimler AG). In
formed following Fiat’s acquisition of the 2007, Daimler sold 80.0% of Chrysler to
Fiat Chrysler Auburn Hills, MI-based automaker. Cerberus Capital Management, a private
Automobiles NV Chrysler was the smallest of the domestic equity fund. Chrysler then filed for Chapter
Market share: 9.9% automakers, selling vehicles under the 11 bankruptcy in 2009, following a series of
Chrysler, Dodge, Ram and Jeep brands. federal cash infusions. The United Auto
Industry Brand Names
However, the company is more Workers union and Fiat were the primary
Nissan
dependent on light trucks and SUVs than owners of Chrysler following the
Infiniti
Ford or General Motors, with the two bankruptcy. However, after purchasing the
product segments accounting for roughly US Treasury’s stake in the company in July
60.0% of sales in 2016 (latest data 2011, Fiat announced it would own 100.0%
available). Dodge and Jeep are geared of Chrysler after purchasing the remaining
toward light trucks and sport-utility stake owned by the Voluntary Employees’
vehicles (SUVs), while the Chrysler brand Beneficiary Association.
focuses on cars and minivans.
Chrysler Group had a rocky corporate Financial performance
history prior to the five-year period, rife Revenue generated from FCA’s industry-
with takeovers, mergers and bailouts. From relevant operations is expected to grow at
*Estimates
SOURCE: ANNUAL REPORT AND IBISWORLD
Major Companies
Player Performance an annualized rate of 4.2% to $19.4 revenue declined in 2015, due to lower
continued billion over the five years to 2017. FCA shipments and unfavorable currency
revamped several industry-relevant rates. Nevertheless, FCA has planned a
vehicles that have experienced success phaseout of the Chrysler 200 and Dodge
with consumers. For example, Jeep sales Dart to better meet market demand for
have surpassed 1.0 million units pickup trucks and SUVs. As a result,
worldwide, a new all-time sales record for industry-relevant revenue is expected to
the brand. However, industry-relevant continue trending upward.
Player Performance Toyota Motor Corporation (Toyota), recall 4.9 million vehicles due to
which has its North American improper pedal installation. The pedals
headquarters in Plano, TX, is one of the were installed in several Toyota and
Toyota Motor world’s largest automotive manufacturers. Lexus vehicles and caused some vehicles
Corporation Shortly after the Great East Japan to accelerate uncontrollably. Toyota has
Market share: 9.0% Earthquake in March 2011, Toyota a strong lineup of minivans, sport-utility
decided to curb production at its North vehicles (SUVs) and crossover-utility
Industry Brand Names
American plants due to a massive parts vehicles (CUVs), but its trucks have
Toyota
shortage from suppliers who were also never sold exceptionally well in the
Lexus
disrupted by the earthquake. Prior to United States.
idling most of its North American Toyota was the first major automaker
production capacity, Toyota was the to sell hybrid vehicles on a mass-market
single-largest automaker in the country. basis with its Prius hatchback. The small
Toyota’s presence in North America has car, which can reach 50 miles per gallon,
accelerated exponentially since the 1980s has become an industry example for
when it began widespread offerings of its efficiency. The Toyota Highlander and
Camry and Corolla compact cars. Over the Lexus RX 450h SUVs now offer hybrid
years, Toyota has developed a reputation drive train options. Future minivan and
for frugality, efficiency and reliability. truck platforms will likely receive the
However, this image was tarnished in technology as well. Toyota’s innovation
2010 when the company was forced to puts it ahead of other automakers, which
Major Companies
Player Performance have been forced to refine their hybrid industry relevant, the company is also
continued technologies in response. striving to capture a greater share of
industry sales as SUVs and light trucks
Financial performance typically yield higher returns. Moreover,
Over the five years to fiscal 2018, Toyota is anticipated to emphasize fuel
Toyota’s industry-relevant revenue is economy in its industry-relevant
expected to increase at an annualized vehicles, which will likely lift sales
rate of 5.6% to $17.6 billion, partly due further. For example, the RAV4 EV is
to strong demand for RAV4’s, one of the powered by a lithium ion battery pack,
best-selling vehicles. Although Toyota is which increases the vehicle’s fuel
increasingly focusing on newer small efficiency and will likely bolster sales for
passenger vehicles, which are not the company.
Other Companies Honda Motor Company Ltd. Nissan Motor Co. Ltd
Estimated market share: 4.8% Estimated market share: 3.9%
Honda Motor Company Ltd. conducts its Nissan Motor Company Ltd. is one of
North American operations from Los Japan’s largest automakers and was
Angeles, and sells vehicles under the founded in 1933. The company first came to
Honda and Acura brand names. Most the United States in 1958 and established
Acura vehicles are luxury models based Nissan Motor Corporation USA in 1960. In
on Honda cars. Honda’s practical and 1998, Nissan North America Inc., which
affordable small cars have earned it a encompassed all of the company’s various
loyal US following. Honda’s minivans, activities, including design, development,
crossover-utility vehicles and trucks manufacturing and marketing, merged with
perform well in a very crowded market, Nissan Motor Corporation USA to form
but trucks and larger sports-utility Nissan North America Inc. Nissan operates
vehicles account for slightly less than in this industry through the manufacturing
50.0% of Honda’s overall sales. Like its of sports-utility vehicles (SUVs), crossover-
rival, Toyota, Honda focuses on utility vehicles (CUVs) and trucks under the
technology development and affordable Nissan and Infiniti brands. Additionally, the
passenger cars. Honda is known for company, which has its North American
innovative vehicle platforms and designs operations based in Franklin, TN, is the
that emphasize simplicity and frugality. smallest of the three major Japanese
It developed the first commercially manufacturers, yet is increasingly expanding
available hybrid car, the Honda Insight, operations in the United States. Although
in 2000. The three-cylinder vehicle was trucks manufactured by Nissan are not
not intended for mass-market appeal, intended to overtake trucks manufactured
unlike the now-ubiquitous Toyota Prius. by the Big Three, the company offers
Honda continues to push boundaries vehicles in this product segment to expand
with its vehicle innovations and its overall vehicle lineup. Moreover, the
expanded product lines. In 2012, Honda Rogue, a compact sports utility vehicle
introduced a new lineup of gasoline which was first introduced in 2008, has
engines and transmissions to augment its grown in popularity, and has been one of
lineup of medium-size and large hybrid Nissan’s best-selling vehicles throughout the
car models. In fiscal 2018, the company is past five years. As a result, Nissan’s
expected to generate roughly $9.4 billion industry-relevant segment is expected to
in industry-relevant revenue. generate $7.7 billion in fiscal 2017.
Operating Conditions
Capital Intensity | Technology & Systems | Revenue Volatility
Regulation & Policy | Industry Assistance
Capital Intensive
Labor Intensive
Operating Conditions
Technology & Systems Modern vehicle design processes make assembly line be resupplied
heavy use of computer-assisted design independently during production.
Level software, enabling an initial concept to Automakers are heavily involved in
be developed in days rather than the research and development of vehicle
The level
of months. The latest vehicle assembly technologies, including electric and
Technology plants are automated with most labor fuel-cell vehicles. Spending on research
Change is H
igh performed by specially designed is an important component of an
robotic arms. automaker’s long-term business
GM has started operating three of its strategy. GM and other automakers are
assembly plants on a 24-hour basis. developing several technologies that
Traditionally, these factories operate could change the industry if they become
with two eight-hour production shifts commercially viable. Cars and trucks are
and one eight-hour resupply shift. GM host to an ever-increasing array of
plans to adjust its production electronic gadgets typically designed
processes to let single stages of the with a supply company.
Revenue Volatility Industry revenue is largely driven by vehicles, which will stimulate demand for
consumer demand preferences. As gas SUVs and light trucks. Moreover, as the
prices fluctuate, so does the sentiment of overall economy continues to recover,
Level
the consumer. Over the five years to 2017, consumers are more likely to purchase
The level of gas prices are expected to fall from big-ticket items, such as a new vehicle,
Volatility is M
edium historically high levels at an annualized which bolsters industry sales. Per capita
rate of 13.1%, which will likely have a disposable income is expected to increase
huge effect on the purchasing power of 1.4% from 2012 to 2017. As a result of
the consumer, and therefore, industry these trends, the industry has exhibited
revenue. As gas prices decline, consumers moderate revenue volatility during the
will be more apt to purchase larger five-year period.
Operating Conditions
Operating Conditions
Industry Assistance Light-truck and sports-utility vehicle (SUV) branch’s automotive task force. Despite
manufacturers are frequent beneficiaries of the infusion of government funds, GM
government assistance that covers the and Chrysler each entered chapter 11
Level & Trend entire automotive manufacturing industry. bankruptcy in the first half of 2009, on
he level of Industry
T Automakers have a powerful lobbying June 1 and April 30, respectively.
Assistance is presence, which often results in policies Additional details are discussed in the
Mediumand the that favor the industry. In recent years, Major Companies section of this report.
these policies have centered on research
trend is I ncreasing
subsidies and the highly publicized bailout A new direction
of General Motors (GM) and Chrysler. In More recently, government assistance
addition to these high-profile cases, programs have targeted indirect help by
government agencies at all levels are influencing downstream demand trends.
required to purchase vehicles produced by In the midst of declining revenue and
a domestic automaker. sales, the government came to the aid of
industry operators by implementing the
Auto bailout CARS program, also known as Cash for
In September 2008, the federal Clunkers. Started in July 2009 and
government approved a $25.0 billion ending in September 2011, CARS has
loan to US automakers for investment in provided a much-needed boost for major
alternatively fueled vehicle production domestic manufacturers. The program
including biofuels, electric drives and fuel enabled consumers to trade in an old,
cells. The majority of this investment will less fuel-efficient vehicle for a new one
be spent on manufacturing equipment with better fuel economy.
and test vehicles for electric drivetrains According to the CARS website, 85.0%
on small vehicles. Fully electric light of trade-ins were trucks and 59.0% of
trucks will require additional research new vehicles purchased were cars.
and development. Though this may seem like a disservice to
US automakers began lobbying for light truck and SUV manufacturers, this
$25.0 billion bailout package in boost in revenue and sales helped
November 2008. The initial request was stabilize the highly concentrated
turned down. In December 2008, GM automotive industry overall. Major
and Chrysler returned with a more companies have transferred this revenue
detailed proposal to request $34.0 to research and development on wildly
billion, claiming impending bankruptcy if successful new CUV models and hybrid
demands were not met. Congress drivetrains for SUVs and trucks that
approved their request while giving continue to remain popular among
oversight of the package to the executive consumers in 2016.
Key Statistics
Industry Data Industry World price
Revenue Value Added Establish- Exports Imports Wages Domestic of crude oil
($m) ($m) ments Enterprises Employment ($m) ($m) ($m) Demand ($/barrel)
2008 123,329.4 13,842.1 91 67 81,059 31,381.8 89,371.3 6,195.7 181,318.9 97.0
2009 91,350.5 7,346.8 86 64 56,843 15,557.2 50,171.0 4,332.2 125,964.3 61.8
2010 126,050.9 7,378.5 76 58 52,597 24,105.1 79,976.0 4,353.3 181,921.8 79.6
2011 133,865.3 10,054.7 72 57 51,607 31,034.3 89,750.7 4,164.6 192,581.7 104.0
2012 131,912.3 8,286.6 78 63 56,524 31,658.8 95,910.8 4,856.9 196,164.3 105.0
2013 148,417.3 11,769.4 77 63 62,708 33,370.0 98,928.5 5,239.1 213,975.8 104.1
2014 166,300.5 17,694.8 76 62 67,119 34,042.9 103,215.9 5,721.2 235,473.5 96.2
2015 185,077.9 19,532.2 72 59 76,577 34,741.8 113,086.5 6,641.5 263,422.6 50.8
2016 189,447.8 20,566.9 73 60 83,161 34,613.7 121,116.4 6,790.8 275,950.5 43.3
2017 195,475.4 21,295.7 72 59 93,034 32,174.5 122,675.6 7,730.2 285,976.5 52.0
2018 200,238.4 22,454.6 72 58 94,320 30,234.7 127,752.9 7,872.2 297,756.6 54.3
2019 206,228.6 23,652.3 72 58 95,851 31,494.2 132,539.8 8,045.1 307,274.2 55.9
2020 211,494.9 24,017.3 72 59 97,735 31,724.8 134,240.8 8,233.2 314,010.9 57.4
2021 216,500.9 24,667.7 72 59 99,314 32,404.5 135,115.5 8,398.1 319,211.9 59.0
2022 217,175.7 24,727.7 71 58 99,957 32,449.4 139,237.4 8,449.4 323,963.7 60.5
Sector Rank 4/438 9/437 328/438 330/438 40/438 7/402 2/402 20/438 2/402 N/A
Economy Rank 54/1891 161/1584 1693/1891 1672/1891 470/1891 9/526 5/526 258/1891 5/526 N/A
Figures are in inflation-adjusted 2017 dollars. Rank refers to 2017 data. SOURCE: WWW.IBISWORLD.COM
Liquidity Ratios
Current Ratio 1.4 1.4 1.4 1.5 n/a 1.7 1.4
Quick Ratio 0.6 0.7 0.6 0.6 n/a 0.5 0.7
Sales / Receivables (Trade Receivables
Turnover) 10.0 11.3 10.4 10.6 n/a 11.2 11.0
Days’ Receivables 36.5 32.3 35.1 34.4 n/a 32.6 33.2
Cost of Sales / Inventory (Inventory Turnover) 3.6 8.0 4.8 4.4 n/a 6.2 5.3
Days’ Inventory 101.4 45.6 76.0 83.0 n/a 58.9 68.9
Cost of Sales / Payables (Payables Turnover) 13.9 12.6 11.0 13.8 n/a 12.4 17.2
Days’ Payables 26.3 29.0 33.2 26.4 n/a 29.4 21.2
Sales / Working Capital 9.6 10.6 10.1 15.4 n/a 11.1 15.4
Coverage Ratios
Earnings Before Interest & Taxes (EBIT) /
Interest 3.5 4.8 7.1 16.5 n/a 32.9 7.4
Net Profit + Dep., Depletion, Amort. / Current
Maturities LT Debt 5.1 7.4 2.0 n/a n/a n/a n/a
Leverage Ratios
Fixed Assets / Net Worth 0.4 0.5 0.4 0.3 n/a 0.2 0.3
Debt / Net Worth 2.4 2.3 2.3 1.8 n/a 1.2 3.0
Tangible Net Worth 33.0 21.4 27.0 31.9 n/a 45.2 29.2
Operating Ratios
Profit before Taxes / Net Worth, % 14.2 22.9 36.0 38.0 n/a 46.7 29.3
Profit before Taxes / Total Assets, % 3.9 7.8 8.2 9.9 n/a 23.4 11.4
Sales / Net Fixed Assets 19.6 14.4 15.5 23.0 n/a 40.1 36.5
Sales / Total Assets (Asset Turnover) 1.9 2.0 2.1 2.2 n/a 2.3 2.4
Assets, %
Cash & Equivalents 8.3 11.7 10.3 7.4 n/a 8.3 6.3
Trade Receivables (net) 21.9 23.9 21.3 22.1 n/a 15.6 27.4
Inventory 38.6 28.5 35.2 40.2 n/a 38.7 42.2
All Other Current Assets 4.5 3.1 4.9 2.0 n/a 0.3 3.6
Total Current Assets 73.3 67.2 71.7 71.6 n/a 62.8 79.6
Fixed Assets (net) 18.5 19.8 19.4 17.4 n/a 25.5 13.3
Intangibles (net) 3.5 4.1 5.6 4.0 n/a 2.3 4.1
All Other Non-Current Assets 4.8 8.9 3.3 7.0 n/a 9.4 3.0
Total Assets 100.0 100.0 100.0 100.0 n/a 100.0 100.0
Total Assets ($m) 2,518.5 2,075.8 1,499.9 1,118.7 20.1 111.0 987.6
Liabilities, %
Notes Payable-Short Term 10.9 11.5 13.0 17.8 n/a 10.9 15.9
Current Maturities L/T/D 5.7 3.6 2.9 1.3 n/a 1.2 1.7
Trade Payables 17.2 16.3 18.3 15.7 n/a 16.5 13.9
Income Taxes Payable 0.3 0.1 0.1 n/a n/a n/a n/a
All Other Current Liabilities 18.2 18.9 17.7 18.5 n/a 10.3 22.5
Total Current Liabilities 52.2 50.4 51.9 53.3 n/a 38.9 54.1
Long Term Debt 8.0 10.0 10.9 8.3 n/a 13.3 7.7
Deferred Taxes 0.3 0.3 0.1 n/a n/a n/a n/a
All Other Non-Current Liabilities 2.9 13.7 4.4 2.5 n/a 0.3 4.8
Net Worth 36.5 25.5 32.6 35.9 n/a 47.5 33.3
Total Liabilities & Net Worth ($m) 2,518.5 2,075.8 1,499.9 1,118.7 20.1 111.0 987.6
Source: RMA Annual Statement Studies, rmahq.org. RMA data for all industries is derived directly from more
than 260,000 statements of member financial institutions’ borrowers and prospects.
Note: For a full description of the ratios refer to the Key Statistics chapter online.
Industry Jargon CORPORATE AVERAGE FUEL ECONOMY (CAFE)A HYBRID VEHICLEA vehicle that uses two different
regulation intended to improve the average fuel power sources to run, in most cases referring to an
economy of cars and light trucks. electric battery in conjunction with a gasoline engine.
CROSSOVER-UTILITY VEHICLE (CUV)A mid-sized MILES PER GALLON (MPG)A measure used to indicate
vehicle that combines features of a car with an SUV. They fuel-efficiency.
are generally smaller and more fuel-efficient than SUVs. SPORT-UTILITY VEHICLE (SUV)A mid-sized vehicle
FUEL CELLAn energy source that operates like a similar to a station wagon, but built on a light-truck
battery but does not require recharging; oxygen passes chassis.
over one electrode and hydrogen over a second,
generating electricity, water and heat.
IBISWorld Glossary BARRIERS TO ENTRYHigh barriers to entry mean that INDUSTRY CONCENTRATIONAn indicator of the
new companies struggle to enter an industry, while low dominance of the top four players in an industry.
barriers mean it is easy for new companies to enter an Concentration is considered high if the top players
industry. account for more than 70% of industry revenue.
CAPITAL INTENSITYCompares the amount of money Medium is 40% to 70% of industry revenue. Low is less
spent on capital (plant, machinery and equipment) with than 40%.
that spent on labor. IBISWorld uses the ratio of INDUSTRY REVENUEThe total sales of industry goods
depreciation to wages as a proxy for capital intensity. and services (exclusive of excise and sales tax); subsidies
High capital intensity is more than $0.333 of capital to on production; all other operating income from outside
$1 of labor; medium is $0.125 to $0.333 of capital to $1 the firm (such as commission income, repair and service
of labor; low is less than $0.125 of capital for every $1 of income, and rent, leasing and hiring income); and
labor. capital work done by rental or lease. Receipts from
CONSTANT PRICESThe dollar figures in the Key interest royalties, dividends and the sale of fixed
Statistics table, including forecasts, are adjusted for tangible assets are excluded.
inflation using the current year (i.e. year published) as INDUSTRY VALUE ADDED (IVA)The market value of
the base year. This removes the impact of changes in goods and services produced by the industry minus the
the purchasing power of the dollar, leaving only the cost of goods and services used in production. IVA is
“real” growth or decline in industry metrics. The inflation also described as the industry’s contribution to GDP, or
adjustments in IBISWorld’s reports are made using the profit plus wages and depreciation.
US Bureau of Economic Analysis’ implicit GDP price INTERNATIONAL TRADEThe level of international
deflator. trade is determined by ratios of exports to revenue and
DOMESTIC DEMANDSpending on industry goods and imports to domestic demand. For exports/revenue: low is
services within the United States, regardless of their less than 5%, medium is 5% to 20%, and high is more
country of origin. It is derived by adding imports to than 20%. Imports/domestic demand: low is less than
industry revenue, and then subtracting exports. 5%, medium is 5% to 35%, and high is more than
EMPLOYMENTThe number of permanent, part-time, 35%.
temporary and seasonal employees, working proprietors, LIFE CYCLEAll industries go through periods of growth,
partners, managers and executives within the industry. maturity and decline. IBISWorld determines an
ENTERPRISEA division that is separately managed and industry’s life cycle by considering its growth rate
keeps management accounts. Each enterprise consists (measured by IVA) compared with GDP; the growth rate
of one or more establishments that are under common of the number of establishments; the amount of change
ownership or control. the industry’s products are undergoing; the rate of
technological change; and the level of customer
ESTABLISHMENTThe smallest type of accounting unit
acceptance of industry products and services.
within an enterprise, an establishment is a single
physical location where business is conducted or where NONEMPLOYING ESTABLISHMENTBusinesses with
services or industrial operations are performed. Multiple no paid employment or payroll, also known as
establishments under common control make up an nonemployers. These are mostly set up by self-employed
enterprise. individuals.
EXPORTSTotal value of industry goods and services sold PROFITIBISWorld uses earnings before interest and tax
by US companies to customers abroad. (EBIT) as an indicator of a company’s profitability. It is
calculated as revenue minus expenses, excluding
IMPORTSTotal value of industry goods and services
interest and tax.
brought in from foreign countries to be sold in the
United States.
IBISWorld Glossary VOLATILITYThe level of volatility is determined by WAGESThe gross total wages and salaries of all
averaging the absolute change in revenue in each of the employees in the industry. The cost of benefits is also
continued past five years. Volatility levels: very high is more than included in this figure.
±20%; high volatility is ±10% to ±20%; moderate
volatility is ±3% to ±10%; and low volatility is less than
±3%.
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