Automobiles

INDUSTRIAL CODES

NAICS: 33-6111 Automobile Manufacturing, 33-6112 Light Truck and Utility Vehicle Manufacturing

SIC: 3711 Motor Vehicles and Passenger Cars Bodies

NAICS-Based Product Codes: 33-6111 through 33-61110100 and 33-6112 through 33-61120100

PRODUCT OVERVIEW

The automobile, which first appeared commercially in the nineteenth century and went on to revolutionize personal transportation during the twentieth century, is evolving through a series of fundamental changes early in the twenty-first century in order to achieve two somewhat incompatible goals. On the one hand, there is a growing mandate among many governments to minimize the automobile's impact on the environment and non-renewable natural resources. On the other hand, it must maintain its utility and affordability if it is to remain attainable by the general public.

Its evolution includes structural changes in two critical areas: (1) the continued blurring of the line between cars and other light-duty vehicles such as pick-up trucks, vans, and sport utility vehicles, and (2) a serious effort to eventually replace the internal combustion engine with an alternative powertrain and energy source, possibly the space age version of the fuel cell, in order to minimize or eliminate undesirable exhaust emissions. There has also been an ongoing emphasis on increasing the safety of all light vehicles, triggered in 1965 by Ralph Nader's book, Unsafe At Any Speed.

The blurring of the roles of cars and light trucks is a reminder that the basic definition of an automobile needs to be either broadened or discarded. Typical modes of personal transportation are no longer limited to a "four-wheeled automotive vehicle designed for passenger transportation and commonly propelled by an internal-combustion engine, using a volatile fuel" per Webster's New Collegiate Dictionary.

In today's world, personal transportation includes pickup trucks, some capable of carrying up to five passengers, as well as sport utility vehicles (SUVs) and vans, both mini and full sized. Pickups and SUVs also come in compact and full-sized models. Since the story of both cars and light trucks is so interwoven and complex, for the purposes of this essay we will explore the automobile in the broader context of being any light vehicle used for passenger transportation.

As the name implies, a pickup is a small truck with an open cargo-carrying bed. Traditional SUVs function like station wagons with passenger and cargo-carrying capabilities but are built on pickup truck platforms. A new breed of downsized compact SUVs appeared early in the twenty-first century based on car rather truck platforms. These more car-like SUVs are an example of the blurring of lines between cars and trucks and will be covered later in this essay. Full-sized vans include commercial-style passenger vans and van conversions that provide living room comfort for its passengers, while minivans are primarily factory-built smaller versions of van conversion designed for active families with accommodations for both passengers and/or cargo.

Forerunners of the modern automobile actually first appeared in the eighteenth century—notably a steam-powered three-wheeled vehicle invented in France in 1769 by Nicholas Joseph Cugnot—but self-propelled vehicles didn't become commercially viable until the introduction of the internal combustion engine in the nineteenth century. Etienne Lenoir, a Belgian inventor, developed the first internal combustion engine, which he demonstrated in Paris in 1862. Then in 1878, Nicholas Otto, a German inventor, developed a four-stroke coal-gas engine that was quieter and smoother running. In 1885 Germans Karl Benz and Gottlieb Daimler built the first gasoline-powered vehicles, and in 1889, Frenchman Armand Peugeot built the first automobile for commercial sale. American brothers Charles and Frank Duryea began production in 1896 of the first commercially available gasoline-powered car in the United States.

Prior to the introduction of the internal combustion engine, steam engines and electric motors were used to power the so-called horseless carriage. In fact, by the close of the nineteenth century, some 30 manufacturers in the United States were offering an array of vehicles powered by gasoline, steam or electricity with electric vehicles outselling all other types of cars. Steam engines, however, proved too heavy to be practical for road vehicles, plus they had long start-up times and their need for plenty of water limited their range, so they soon faded from the scene. Electric vehicles of that era also had limited range and were very expensive and slow, which ultimately led to the declining popularity of electrically powered cars.

Early gasoline-powered vehicles also had their drawbacks, including noise, the smell of the fuel, complicated shifting requirements and difficult hand cranking needed to start the engine. Several developments in the early years of the twentieth century propelled the gasoline internal combustion engine to prominence and made possible the personal transportation revolution, most notably the invention of the electric starter by Charles Kettering in 1912, which eliminated the hand crank and initiated the mass production of the gasoline engine by Henry Ford.

It was the introduction in 1908 of the very affordable Model T by Henry Ford with its $950 price tag that really marked the beginning of the personal transportation revolution. That price dropped as low as $280 when Ford revolutionized automotive production in 1913 with the constantly moving assembly line and $5 per day wages in 1914. These developments made cars affordable for the average person, gave factory workers increased buying power, and triggered the explosive growth of the global automotive industry, which by 2006 was selling nearly 64 million vechicles annually.

The history of pickup trucks generally follows a timeline similar to cars. Gottlieb Daimler, the German automobile pioneer, built the first pickup truck in 1896, a four-horsepower belt-driven vehicle with somewhat limited capability. The first truck company to go into business in the United States, the Rapid Motor Vehicle Company, was opened in Detroit in 1902 by two brothers, Max and Morris Grabowski. The previous year they had designed and built a single-cylinder chain driven dray machine that was basically a motorized version of a horse-drawn wagon. Rapid and the Reliance Motor Company, also of Detroit, which also began building trucks in 1902, were purchased in 1908 and 1909, respectively, by William C. Durant, founder of General Motors Corporation (GMC).

Both Rapid and Reliant trucks were big gas-powered machines designed to replace horse-drawn wagons, so in the early years GMC used electric vehicles for light-duty delivery. However, in 1916 GMC converted everything to gasoline engines. Light-duty Chevrolet trucks appeared on the scene in 1918 and GMC-badged trucks were introduced in 1927, a product that originated with Pontiac but was badged a GMC to avoid the prospect of three General Motors-branded trucks. The other top-selling American pickup truck pioneers, Dodge and Ford, introduced their pickup truck models in 1918 and 1925, respectively.

Compact pickup trucks, which today are among the best-selling vehicles in the world, first appeared in the United States in 1959 when the Nissan Motor Company, a small Japanese manufacturer, exported the Datsun 1000, which had a load capacity of only a quarter-ton and a 1000 cc, 37-horsepower engine. While initial models only sold a few hundred vehicles per year, sales jumped to more than 15,000 in 1965 with the importation of the Datsun 520 pickup. Nissan eventually phased out the Datsun model name and badged all subsequent models as Nissan. Toyota jumped into the compact pickup fray in the U.S. market in 1964 by exporting its Stout, followed in 1969 by the Hi-Lux.

The popularity of the compact pickups caught the attention of the domestic Big Three (General Motors, Ford, and Chrysler) in the United States and they countered in the early years with imports of their own: Chevrolet with the LUV from Isuzu Motors Ltd. in 1972; Ford with the Courier from Mazda at about the same time; and Dodge from Mitsubishi in 1979. These models evolved into the domestically built Chevrolet S-10, Ford Ranger, and the Dodge Dakota, introduced in the mid-1980s as the first mid-size pickup trucks.

Both SUVs and station wagons trace their heritage to the 1920s when cars called depot hacks or suburbans were used to carry passengers and their luggage from train stations. Chevrolet and GMC applied the name to a utility vehicle introduced in 1936 as a passenger-carrying vehicle based on a commercial panel truck. Another early SUV forerunner was the Willy's Jeep Wagon introduced in 1940 as a utility vehicle for the family and eventually redesigned as the Jeep Wagoneer in 1963. The British Land Rover, another icon of the SUV industry, was inspired by the World War II Willy's Jeep and introduced by Rover Company Ltd. at the 1948 Amsterdam Motor Show.

While SUVs evolved as truck-based vehicles, the classic station wagon is a rear-wheel-drive car with a stretched wheelbase to accommodate a cargo-carrying compartment accessible via a rear tailgate. The first production station wagon was the 1923 wood-bodied Star built by the Star Motor Company, which had been purchased by the Durant Motor Company. Ford made the station wagon affordable to the general public with the introduction of a mass-produced Modal A version in 1929.

Passenger vans have been part of the light vehicle automotive scene since the 1920s but minivans did not emerge until they were introduced in 1983 by Chrysler Corporation, the market leader in full-size vans. The company recognized the desirability of a downsized van that fits in a typical garage and offers all the comforts and handling ease of a station wagon with a lot more room for passengers and cargo. Ford and General Motors followed suit in 1985 with the Aerostar and Astro/Safari, respectively.

MARKET

The global automotive market has been experiencing weak demand growth in the early years of the twenty-first century, but growth nonetheless. The worldwide market for cars and light trucks increased 3.4 percent from 61.69 million vehicles in 2005 to 63.81 million in 2006, according to J.D. Power Automotive Forecasting.

The U.S. market, which has been under intense competitive pressure from imports, was one of only two major markets to lose ground with sales fading 2.5 percent from 16.95 million in 2005 to 16.52 million in 2006. Japan was the other market experiencing declining demand, falling 2.5 percent from 5.73 million in 2005 to 5.59 million in 2006. The Toyota-Daihatsu manufacturing group, however, is projected to experience the strongest growth for the near future, increasing 3.8 percent from 2004 to 2009 with increased penetration in the North American and European markets, according to Dave Liggett in the just-auto.com Management Briefing global market review of car sales, March, 2005. No other major manufacturer is expected to experience any significant growth, according to the report. In fact, most are predicted to lose market share.

Western Europe, the largest automotive market in the world, managed to grow slightly during 2006: 0.8 percent from 16.52 million units in 2005 to 16.65 million in 2006. The emerging markets of the world, on the other hand, experienced more robust growth: other European countries were up a combined 8.1 percent; Brazil and Argentina, 13.3 percent, and the other markets of the world, 14.6 percent.

In terms of production, the biggest producers are vehicle manufactures in the Asia-Pacific region, building a total of 24.83 million vehicles in 2005. Japan is the leading producer there, building 9.02 million cars and 1.78 million trucks that year. European manufacturers are the second largest vehicle producers with Germany the leader, producing 5.35 million cars and 407,523 trucks. In North America, the United States is the dominant producer, building more than 12 million cars and trucks in 2005 with General Motors the leader, building 1.15 million cars and 2.15 million trucks.

Worldwide, General Motors and Toyota are the biggest players, each building over 8 million vehicles annually with Toyota vying with GM for the number one spot. Ford is number three worldwide but is losing ground midway through the first decade of the twenty-first century. World rankings, based on global production in 2004 and 2005, are presented in Figure 9. Through the rest of the decade and as the century unfolds further, the rankings of all the manufacturers are very apt to change significantly as emerging players—notably vehicle builders in China and Korea—challenge the traditional leaders.

A comparison of global automotive sales with production in each of the world markets illustrates one of the major problems confronting domestic automakers in Europe and North America, who are being challenged by imports from Asia-Pacific producers, most notably in Japan and Korea. Nearly seven million vehicles built in 2005 in Asia, including more than 933,000 trucks, are exported, primarily to the United States, although 182,000 more trucks were sold in Europe than were built there that year. Figure 10 presents production and sales data for 2005 by region. Note the disparity between domestic production and sales in North America: 2.76 million more cars and 1.57 million more trucks were sold than were built there. Car sales also included exports from Europe, which produced 607,423 more cars than were sold in those countries.

The two largest, most developed automotive markets of the world—the United States and Western Europe—are both extremely competitive markets. In the United States, for example, the traditional Big Three are under unrelenting pressure from a host of new entrants from Asia and Europe, many of whom have established production facilities in North America. General Motors and Ford, number one and two in light vehicle sales, respectively, lost market share consistently through the first five years of the twenty-first century while Toyota, American Honda, Nissan, and Hyundai Group consistently increased market share. Figure 11 presents five years worth of U.S. light vehicle sales figures broken down by leading automobile manufacturers.

KEY PRODUCERS/MANUFACTURERS

There are six automotive production regions in the world: Africa, Asia-Pacific, Central/South America, Europe, Middle East, and North America. The 15 major producers—those building more than one million vehicles annually—are concentrated in three regions: Asia-Pacific, Europe, and North America. Since the automotive industry is a truly global enterprise with some 50 vehicle builders scattered throughout the regions of the world, many of the major manufacturers have production facilities in more than one region, often many more, as is the case with General Motors, Toyota, and Ford.

General Motors, for example, has manufacturing operations in 33 countries located in all six regions of the world. It employs about 324,000 people globally, about half in the United States, and had revenues of $192.6 billion in 2005. Toyota has manufacturing operations in some 26 countries in North and South America, Europe, Africa, and Asia-Pacific, has some 289,980 employees worldwide, including 38,340 in North America, and revenues of $174.6 billion in 2005. Ford, the third largest automotive producer, operates plants in 23 countries, also located in North and South America, Europe, Africa, and Asia-Pacific. Worldwide employment is about 300,000 and 2005 revenues were $176.9 billion.

The top 15 global manufacturers, including their affiliates and subsidiaries, account for 85 percent of the world vehicle production. These companies and their global affiliate and subsidiary operations are:

• General Motors, which includes Daewoo (Korea) and Holden (Australia)
• Toyota Motor Corp., which includes Daihatsu (Japan) and Hino (Japan)
• Ford Motor Company, which includes Aston Martin (UK), Jaguar (UK), Land Rover (UK) and Volvo Car Corp. (Sweden)
• Volkswagen AG, which includes Audi (Germany), Bentley (UK), Bugatti (Italy), Lamborghini (Italy), Skoda (Czech Republic) and Seat (Spain)
• DaimlerChrysler AG, which includes Chrysler Division, Dodge, Jeep, Mercedes-Benz (Germany), Smart (Germany), and Commercial Vehicle Division, EvoBus GmbH (Germany), Freightliner (USA), and Mitsubishi Fuso Truck and Bus Corp. (Japan)
• Hyundai-Kia Automotive, which includes Hyundai Motor (Korea) and Kia Motors (Korea)
• Nissan Motor Co. (Japan)
• Honda Motor Co. (Japan)
• PSA/Peugeot-Citroen SA (France)
• Renault SA (France), which includes Dacia (Romania) and Renault-Samsung Motors (Korea)
• Suzuki Motor Corp (Japan), which includes Maruti Udyog Ltd. (India)
• Fiat S.p.A. (Italy), which includes Fiat Auto (Italy), Ferrari (Italy), Maserati (Italy), and Iveco (Italy)
• Mitsubishi Motor Corp. (Japan)
• BMW Group (Germany) which includes Rolls-Royce (UK)
• Mazda Motor Corp. (Japan)

In North America, General Motors is the leading vehicle builder, producing Buick, Cadillac, Chevrolet, GMC, Hummer, Isuzu, Oldsmobile, Pontiac, Saab and Saturn vehicles. The corporation operates facilities in 28 states. Ford plants produce Ford, Lincoln and Mercury vehicles. DaimlerChrysler builds Chrysler, Dodge, Jeep and Mercedes-Benz vehicles.

DaimlerChrysler, the number five producer worldwide and number three in the United States, operates 33 plants throughout North America, including 24 in 7 of the U.S. states, 5 in Mexico, and 4 in Canada. Globally, the corporation has 382,724 employees in 17 countries in Europe; North and South America; Asia-Pacific, including Australia; Africa; and the Middle East. Revenues in 2005 were $177.36 billion.

The other major vehicle producers in the U.S. include Toyota Motor, which builds Toyota, Lexus and Scion vehicles at its plants in Cambridge, Ontario, Canada; Georgetown, Kentucky and Princeton, Indiana; and Tijuana, Mexico. Honda produces Acura and Honda vehicles at plants in Alliston, Ontario, Canada; East Liberty and Marysville, Ohio; Lincoln, Alabama; and El Salto Jalisco, Mexico. Nissan operates plants in Canton, Mississippi and Smyrna, Tennessee, in the U.S., and in Aquascalientes, and Cuernavaca, Mexico, producing Nissan-branded vehicles plus providing North American production for Renault in its Mexico plants.

Other companies building vehicles in the United States include: Volkswagen which builds the Beetle, Jetta, and VW medium trucks; BMW which builds the BMW Z4 roadster and X5, Subaru which produces both the Subaru Baja and Legacy, as well as the Isuzu Axiom, Rodeo and B9; Hyundai which makes the Hyundai Sonata; Misubishi which builds the Eclipse, Galant and Endeavor as well as the Chrysler Sebring and Dodge Stratus for the Chrysler group of DaimlerChrysler; and AM General which builds the Hummer H1 and Hummer H2 for General Motors.

NUMMI, a joint venture between GM and Toyota in Fremont, California, was established in 1984 to build vehicles for the two automakers. In 2005 this plant produced the Pontiac Vibe, Toyota Corolla and Tacoma. The AutoAlliance is a joint venture between Ford and Mazda in Flat Rock, Michigan, building the Ford Mustang and Mazda 6 sedan, hatchback and wagon. CAMI, a joint venture between GM and Suzuki Motor Corporation in Ingersoll, Ontario, Canada, produces the Chevrolet Equinox, Pontiac Torrent and Suzuki Vitara.

MATERIALS & SUPPLY CHAIN LOGISTICS

The automobile industry is not only global in the extent to which finished vehicles are distributed for sale worldwide from their point of origin, but many of the materials, parts, assemblies, and systems for the majority of vehicles sold commercially are sourced from throughout the world as well. "More than ever, automakers are drawing on suppliers around the globe, shuttling parts across borders in search of lower prices and higher quality," states the Original Equipment Suppliers Association in a recent report.

For example, the report cites an analysis by the Detroit Free Press, noting that "federal data found that vehicles built by Detroit automakers have steadily increased their proportion of parts form outside the United States and Canada. By the same measure, vehicles built in North America by Japan's largest automakers increasingly use U.S. and Canadian parts."

Mexico, which builds more than one million vehicles annually for U.S., European, and Japanese car companies, is also a major component producer and the largest exporter of car parts to the United States—$22 billion in 2004. Canada accounted for $19 billion worth of parts exported to the United States that year and Japanese suppliers accounted for $14 billion, together these two countries accounted for 72 percent of all parts imported into the United States for use in auto production. While Mexico and Japan accounted for 55 percent of U.S. auto parts imports, over three-quarters of the $44 billion in U.S. auto parts exports were headed for auto plants in those two countries in 2004.

Overall, the United States has a trade imbalance in auto parts. In 2005 the imbalance reached $37 billion with exports of $55 billion and imports of $92 billion, including $46.9 billion from North American Free Trade Association (NAFTA) partners Mexico and Canada. Those two countries were also the destination for $42.6 billion in U.S. auto parts exports.

Independent suppliers account for much of the content in vehicles built in the United States and Europe since the two largest suppliers in the world—Delphi Automotive Systems and Visteon Corporation—were each spun off from their parent companies, General Motors and Ford, respectively, and became independent in 1999 and 2000. They were among 1,500 and 2,000 tier one major system suppliers (suppliers selling components and systems directly to the vehicle builders) serving the industry in 2004, a number expected to eventually shrink to between 500 and 700, of which only about 50 will be system integrators dealing directly with the vehicle manufacturers, according to the Boston Consulting Group. This reflects changes in the role of the major suppliers that are being asked to provide larger and more complete vehicle systems or segments rather than simply supplying hundreds of parts and components.

The leading global suppliers include Delphi, Visteon, Lear Corporation, Johnson Controls, Inc., TRW and Dana Corporation all with world headquarters in the United States. Magna International, Inc. has its headquarters in Canada; Robert Bosch GmbH is based in Germany; Valeo SA in France; and Denso Corporation, Aisin Seiki, Co. Ltd. and Yazaki Corporation, have headquarters in Japan.

In the United States, automotive suppliers employ more workers than any other manufacturing group, directly employing more than three-quarter million and contributing to 4.5 million jobs nation wide, including nearly 2 million of those indirect employees in support industries such as steel, plastic, and technical services. Suppliers' total annual payroll, including benefits, is $253 billion, or an average of $45,790 per worker annually, according to a 2007 report from the Center for Automotive Research.

Japan has traditionally operated under the keiretsu system in which an association of companies is organized that cooperates with and works with each other. In the automotive industries, supplier keiretsu sometimes have several hundred companies associated with a particular vehicle manufacturing company. Usually, these agreements are somewhat exclusive, obliging the two parties, the keiretsu companies and the auto manufacturer, to deal with each other and not others. This, in essence, bars non-members from obtaining supplier arrangements with the vehicle manufacturer. These keiretsu relationships are tending to dissolve as cross sourcing of components among the suppliers increases with industry globalization.

With the global automotive industry producing more than 64 million vehicles each year, it is a major consumer of various grades of steel, which accounts for some 55 percent of an average vehicle's content by weight—over 1,700 lbs. in a mid-size sedan. Other materials consumed include cast iron, averaging more than 400 lbs., primarily for engine and suspension components; plastics and composites, nearly 250 lbs.; aluminum, about 190 lbs.; plus rubber, glass, copper, zinc, other metals, fabrics and various fluids and lubricants. These materials are sourced from all over the world, the location depending on price, availability and accessibility on the part of the provider of parts and/or components supplying the vehicle manufacturer.

DISTRIBUTION CHANNEL

Automobile sales traditionally have been handled through franchised independent dealerships in the major markets of the world. These independent dealerships act as the retailing bridge between the vehicle manufacturers and the consumer. In the United States, the National Automobile Dealers Association (NADA) represents some 20,000 franchised new car and truck dealers holding nearly 43,000 separate franchises, both domestic and international (many dealerships represent multiple nameplates, including those from more than one manufacturer). In addition the American International Automobile Dealer Association (AIADA) represents 11,000 international nameplate automobile franchises.

Multiple nameplate representation often covers both domestic and foreign brands. For example, General Motor's automotive brands are Buick, Cadillac, Chevrolet, GMC, Holden (Australia), HUMMER, Opel (Germany), Pontiac, Saab (Sweden), Saturn, and Vauxhall (UK). In some countries, the GM Group distribution network also markets vehicles manufactured by GM Daewoo (Korea) and Isuzu, Fuji (Subaru), and Suzuki (Japan).

Since dealerships accept trade-ins as part of most new car sales, the dealerships also offer used cars, although new car sales typically account for more than half of all sales revenue for a dealership. The balance comes from used car sales, repair and service, and aftermarket parts and component sales. Vehicle leasing is also offered by dealerships as a financing option for consumers. In addition to traditional marketing techniques to attract buyers to their showrooms, automobile dealers are increasingly using the Internet to market new and used cars.

New car distribution systems use both truck transports and railroads to transport vehicles to dealerships; offshore exports are handled by ship. In the case of railroads, vehicles are shipped to distribution centers, then delivered to dealerships via truck. Ford, for example, employs an innovative vehicle distribution system with the Norfolk and Western Railroad in which vehicles sourced from Ford's 20 North American assembly plants are routed through a mixing center network and from there to Ford's dealership network. The mixing center network is a hub and spoke distribution system in which vehicles are shipped to one of four strategically located centers serving the U.S. and Canada. At each mixing center, the vehicles are unloaded, sorted and reloaded for delivery to a common destination, reducing time spent waiting at a plant until a railroad car is loaded with that plant's vehicles headed for a common destination.

In addition to new car dealerships, used cars are also sold by independent dealers, ranging from small, one-location stores or lots to large nationwide superstores.

KEY USERS

Next to a new home purchase or paying the rent, the personal car or light truck is the most essential expense for most members of the public throughout much of the world, accounting for a large majority of new vehicle sales. In the United States, for example, 25 to 30 percent of all new car sales are sold directly to the end consumers. Fleet sales—government agencies, businesses, and police departments—account for the balance.

ADJACENT MARKETS

In addition to automobiles and light trucks, transportation equipment includes a wide variety of powered vehicles, everything from golf carts, motor scooters, and motor cycles to commercial vans, medium and heavy trucks, recreational vehicles, other commercial vehicles such as buses, and heavy-duty construction equipment.

For the majority of the American public—with the exception of those adventurous enough routinely to hop on a bicycle or motorcycle to commute to work every day—markets adjacent to new automobiles are represented by used, or what are often referred to as previously owned, cars and mass transit. Viewed from the retail level, as shown by Manufacturing & Distribution USA, the used car market in 2007 represented dealer sales of $60.7 billion against new car dealer sales of $775.6 billion. Previously owned cars were thus 7.3 percent of all auto purchases in that year, not counting exchanges, which occurred between individuals. Historical patterns suggest that used cars are more and more of a choice (and perhaps a necessary choice) for a segment of the public. Used cars in 1987 were 3.7 percent of retail auto sales, in 1992 4.6 percent, in 2002 6.9 percent—suggesting that economic pressures may be inducing a growing number of people to select one of the adjacent markets to get their transportation.

Based on data collected by the Bureau of Transportation Statistics, an element of the U.S. Department of Transportation (DOT), just over 4 percent of all workers make use of mass transit of one kind or another (bus, streetcar, subway, or elevated train) in their daily commute. In 1989 4.9 million workers (4.6% of all commuters) reached the job by mass transit every day. In 2001, 5.6 million (4.7% of workers) were using transit. By 2005 numbers had declined to 5.4 million workers (4.4 % of all those commuting). People using bicycles and motorcycles, incidentally, represented 0.7 percent of commuters in 1989 and 2001 and 0.6 percent in 2005.

In quite a real sense, the growing trend of working from one's personal residence, made possible by the computer and the Internet, represents an interesting adjacent way of avoiding transportation—at least to the place of work. DOT's surveys also capture this phenomenon and show that it is growing. Some 2.7 million people worked at home in 1989 (2.6% of all workers). The numbers have steadily increased since, to 3.4 million in 2001 (2.8%) and 4.1 million in 2005 (3.4%).

Adjacent markets for long distance travel are trips by air, by bus, by train, or by ship. DOT surveys indicate that the automobile (no distinctions made between new and used cars) is the dominant form of transportation for taking trips. In 2001, 89 percent of all trips were made by using personal vehicles; all other forms came in a distant second: 7.4 percent of trips were made by air; 2.1 percent by bus; 0.8 percent by train; 0.1 percent by ship, boat, or ferry; and the remainder were not classified by DOT. These results were somewhat less skewed in favor of autos/pickups if, instead of counting trips, we count person-miles traveled, to use DOT's terminology. Using that category, travel by mode in 2001 shows a different pattern: personal vehicles, 55.9 percent of miles; air travel, 41 percent; bus travel, 2 percent; train travel, 0.8 percent; and water-borne travel, 0.3 percent.

RESEARCH & DEVELOPMENT

The Research and Development (R&D) efforts of the automotive industry are primarily focused on technologies that will make the automobile as environmentally compatible, as economical to operate, and as safe as possible, goals which in many ways are mutually exclusive. Safety and emission reductions all add cost, while efforts to improve fuel economy by reducing weight can make the vehicle less safe and crash-worthy.

To make vehicles more environmentally compatible, the major emphasis has been on emission reduction, although there is increasing interest in making the vehicle as recyclable as possible. The latter is being improved by using recyclable materials as much as possible and making it easier to disassemble and extract recyclable materials at the end of its useful life.

The primary efforts, however, have been on power-train technology, with the emphasis on cleaning up emissions and reducing fuel costs and consumption. This has included constantly improving the venerable gasoline internal combustion engine so it runs as cleanly as possible without an undue sacrifice of power and performance. But by the end of the twentieth century, it had become apparent that further improvements were providing only marginal emission improvement. Alternative power and fuel sources have been the primary goal ever since.

Ironically, one of those alternative sources is a reintroduction of the electric motor, either as the primary motive force or as part of a hybrid system mated with an internal combustion engine. In hybrid versions, the internal combustion engine may be used in any of three ways: strictly as part of a generating system to charge the batteries; as an auxiliary to the electric motor providing extra power when needed, as well as for recharging the batteries; or as the main motive force while the batteries are used to power all other systems in the vehicle, reducing demands on the internal combustion engine. Hybrids have been a major research effort by virtually all of the major manufacturers for use in both cars and trucks.

Electric vehicles reappeared in the 1990s with conversion vehicles from Ford, General Motors, Daimler-Chrysler and Toyota, plus two cars built from the ground up as electric cars, General Motors' EV1 and Honda's EV Plus. Cost and short range imposed by the limitations of battery technology has kept pure electric vehicles out of the mainstream, although promising developments with advanced lithium ion battery packs and General Motors' development of the Chevrolet Volt, an electric car concept vehicle introduced at the North American International Auto Show in 2007, could bring electric vehicles back into a more prominent position. The Volt uses General Motors' patented E-Flex Propulsion System that consists of an electric drive system, lithium ion battery and an onboard generator powered by a one-liter turbocharged internal combustion engine to keep the batteries charged.

Yet another powertrain technology that dates to the early days of the automobile and has been around ever since may in the end be the technology to trump all the others. That is the lowly diesel, an internal combustion engine used extensively in Europe and Asia in small cars, yet largely looked down upon in the United States because of the perception that it is inherently noisy, dirty, hard to start and expensive to buy, although more fuel efficient and longer-lasting than gasoline engines.

A further plus of the diesel is its ability to operate on non-petroleum based fuels. Diesel owners have the option of using biodiesel, a domestically produced renewable fuel that reduces U.S. oil dependence and contributes to the national economy. The Diesel Technology Forum observes that "American consumers are turning to diesel-powered vehicles to help them save money on fuel costs without having to sacrifice the power and performance drivers have come to expect."

A great deal of R&D effort among diesel engine builders has been focused on addressing the negatives associated with classic diesel engines, including improved engine management systems, common rail fuel systems, direct injection, high pressure injectors, multiple spray patterns, turbocharging, particulate filters and new biomass fuels, according to a May 2004 report in Motor magazine.

Long-term, fuel cells are considered to be the next revolution in automotive powertrains. Fuel Cells 2000, an online fuel cell information resource, defines a fuel cell as "an electrochemical device that combines hydrogen and oxygen to produce electricity, with water and heat as its by-product … the process is clean, quiet and highly efficient—two to three times more efficient than fuel burning." Fuel cell vehicles (FCVs) are propelled by electric motors, but unlike battery-electric vehicles that use stored electric energy, FVCs create their own. They can be fueled by pure hydrogen gas stored onboard in high-pressure tanks or by hydrogen-rich fuels such as methanol, natural gas or gasoline which are converted by an onboard device called a reformer, according to the U.S. Department of Energy (DOE).

Research into the development of viable fuel cell vehicles (FCVs) is being spearheaded in the United States by FreedomCAR, a cooperate effort between the DOE and the U.S. Council for Automotive Research (USCAR, a consortium of Ford, General Motors, and DaimlerChrysler). FreedomCAR was formed to promote research into advanced automotive technologies with the potential of dramatically reducing oil consumption and environmental impacts.

Another organization involved in FCV development is the California Fuel Cell Partnership (CaFCP) a collaboration of auto companies, fuel cell providers, fuel cell technology companies and government agencies demonstrating fuel cell electric vehicles in California under day-to-day driving conditions. Its goals are to test and demonstrate the viability of FCVs and related technology under real-world conditions.

FCV R&D efforts are directed at reducing the cost of fuel cells, improving their performance, and developing effective and efficient ways to produce and store hydrogen and other fuels, according to the DOE. FreedomCAR and CaFCP were formed to encourage private companies and government agencies to work together to move FCVs toward commercialization.

Fuel cell technology is also being applied to hybrids. Ford has developed a HySeries drive system that is a battery-powered plug-in electric hybrid that also uses an onboard fuel cell to recharge the batteries once the batteries have discharged about 60 percent of their energy, extending the range of the vehicle.

CURRENT TRENDS

The automotive markets of the world have undergone a number of significant changes throughout the long history of the automobile in styling, technology and consumer tastes. Three dominant trends that are determining its growth and direction in the twenty-first century are:

• The blurring of the line between cars and trucks as truck-like vehicles become increasingly popular.
• The drive to make vehicles more environmentally friendly by cleaning their emissions, making them more recyclable and lighter, and eliminating their consumption of non-renewable resources.
• The desire to make vehicles as safe as possible by improving their crash avoidance capabilities, crash worthiness, and occupant protection.

Within each of these trends, the driving force is the continuing application of advanced technologies, notably the continuing increase of mobile and in-vehicle electronics, expected to rise to $9.6 billion in 2007, an increase of more than 11 percent; automotive-grade semiconductors, experiencing year-on-year growth of 10 percent, reaching $18 billion in 2007; and automotive telematics and navigation, also expected to have strong growth in several world regions, generating about $38.3 billion in revenues by 2011.

As noted, truck production in the United States significantly exceeds car production, the only market in the world where this situation exists. In every other market, truck production is only a fraction of the number of cars built. In Europe, for example, more than six times as many cars as trucks are built. Car and truck sales reflect this same preference. The sale of light trucks to the motoring public has always been strong in North America but is getting ever stronger as more than half the vehicles sold in this market have been light trucks since early in the twenty-first century. This clearly illustrates Americans preference for pickup trucks, SUVs, minivans and van conversions, a trend that is showing signs of taking hold in other markets of the world.

This demand for vehicles that incorporate the comfort and performance of the automobile with the utilitarian benefits of a truck has created a new type of vehicle built from the ground up as a cross between car and truck with unibody construction, relatively high seating positions, two-, four- or all-wheel drive, and capability of carrying up to eight passengers plus reasonable cargo space—the only missing ingredient is an ability to go off-road. This new breed of personal transportation vehicles are known generically as crossovers—built on car chassis with car-like suspension systems and powertrains, yet with the rugged-ness, storage and utilitarian features of SUVs, vans and pickup trucks. The new breed of downsized SUVs mentioned earlier is an example of this trend.

The suburban vehicles of the 1920s and 1930s were the forerunners of this movement, especially as embodied in the early Chevrolet and GMC Suburban models. The modern crossover emerged late in the twentieth century, experiencing quick acceptance among the motoring public in the United States, growing 62 percent from 1999 to 2003 and predicted to continue at a 10 percent rate into the future, according to some forecasters. Among the early competitors in this rapidly growing market were the Acura MC, BMW X5X, Buick Rendezvous, Cadillac SRX, Chrysler Pacifica and PT Cruiser, Chevrolet HHR, Ford Freestyle, GMC Acadia, Honda Pilot and CRV, Infinity FX35, Lexus RX330, Mitsubishi Endeavor, Nissan Murano, Toyota Highlander, VW Touareg, and Volvo XC90.

Although the development of the internal combustion engine was a critical factor in the evolution of the automobile into a commercially viable product, it also sowed the seeds of the major problems associated with the automobile in the late twentieth and early twenty-first centuries: pollution, consumption of a finite resource and, perhaps even more significantly, political issues associated with dependence on imported oil, much of which had to be purchased from unfriendly or unstable foreign governments. These political concerns were especially prevalent in Europe, North America, and Japan, the largest automotive markets in the world.

The diesel engine was invented in the late 1880s by Rudolph Diesel, a German looking for an alternative to steam power. He developed an internal combustion engine based on compression ignition principles capable of running on biomass fuel—peanut oil in initial demonstrations. Early diesels were too large and heavy for use in vehicles and it was not until the 1920s when smaller, lighter versions were introduced for lorries in Europe. Mercedes began using diesels in cars in 1936 and such use in cars has grown ever since. By the early twenty-first century, for example, Europeans were buying diesel-powered cars 35 percent of the time—45 percent if you include light trucks.

The only time drivers in the United States purchased diesel powered cars in any significant number was during the OPEC oil embargo during the nineteen seventies and then only in limited numbers. But advances in diesel engine technology have largely corrected the problems that kept American motorists away. According to the Diesel Technology Forum in a 2005 report, "advanced clean diesel technology offers American consumers a fuel-sipping alternative that does not sacrifice power or performance." Annual registrations of diesel-powered passenger cars in the United States increased 80 percent from 2000 to 2005, growing from 301,000 to nearly 550,000 vehicles, a trend that is expected to continue with diesel sales approximately tripling in the next 10 years, accounting for more than 10 percent of U.S. vehicle sales by 2015.

Vehicles with hybrid powertrains using some combination of an electric motor with a gasoline or diesel engine have been gaining popularity since 1997 when they became commercially available with the introduction in the Japanese market of the Toyota Prius and when Audi began volume production of the A4 Avant-based Duo in Europe (The Duo, which mated a gasoline engine with an electric motor, was not commercially successful so European automakers focused their efforts on advanced diesels).

The first hybrid car to be sold on the mass market in the United States was the two-door Honda Insight, introduced in 1999, followed in 2000 with the importation of the Toyota Prius, the first hybrid four-door sedan to enter the U.S. market. Subsequently, Honda introduced a hybrid version of the Civic in 2002 and Toyota released the Prius II in 2004, the same year Ford introduced the Escape Hybrid, the first American-built commercially available hybrid and the first SUV hybrid, according to the "History of Hybrid Vehicles" from HybridCars.com.

By 2005 hybrid auto sales had reached approximately 212,000 vehicles, 1.3 percent of all light vehicle sales, according to ConsumerAffairs.com, By 2012 hybrid sales were forecast to reach 780,000 vehicles, or 4.2 percent market share, according to that report.

The long-term trend toward more environmentally friendly powertrains is expected to lead to fuel cells. General Motors developed the first operational fuel cell-powered vehicle in 1968 but it wasn't until the 1990s that growing environmental and energy use concerns prompted increased industry and government investment in fuel cell research. By the end of that decade, DaimlerChrysler introduced NECAR IV, the first hydrogen fuel cell-powered commercial automobile, according to the World Fuel Cell Council. General Motors also introduced a drivable fuel cell concept, an Opel Zafira minivan, at the Paris Motor Show.

The twenty-first century could see the fuel cell emerging as a major player in automotive powertrains. "Light-duty automotive applications are by far the largest market opportunity available to fuel cell technology," reports the World Fuel Cell Council, "and have been the focus of intense development effort. All major automakers now have fuel cell vehicle programs. Most have either launched prototype cars or announced their intention to do so." Ford, for example, in early 2007 showcased a fuel cell-powered version of its Edge crossover (an SUV built on an automobile platform).

Weight reduction in order to improve fuel economy is the other environmental improvement target. Steel and cast iron have traditionally represented about two-thirds of the total weight of a typical car, weight reduction research has concentrated on lightweight steels, other lightweight metals such as aluminum and magnesium, plastics, carbon fiber, ceramics and other exotic materials.

Vehicle safety, which became a paramount issue following the 1965 publication of Ralph Nader's Unsafe At Any Speed, has focused on five areas: crash avoidance, pre-crash preparation, occupant protection, post crash measures, and security. Crash avoidance improvements are technical advances in systems that enhance a driver's ability to maintain control of the vehicle despite adverse driving conditions. These have included blind-spot detection systems, tire-pressure monitors, and enhanced vehicle suspension systems, including electronic stability control systems that use sensors to anticipate impending loss of control by the driver and electronically control brakes, throttle, and steering to help the driver guide the vehicle out of danger.

TARGET MARKETS & SEGMENTATION

The auto market can be broken down into a wide variety of segments based on a number of different criteria. Manufacturers analyze these segments very closely when they are designing new cars or planning new promotional campaigns.

A standard breakdown of the market is by the primary motivator involved with a new buyer's decision on which automobile or light truck/SUV to purchase. For many people this decision is made first based upon price range. Consequently, most automakers offer a range of vehicles within broad price ranges so as to offer some variety. There are, of course, automakers who specialize in only the high-end market, like Aston Martin and Rolls-Royce, but these are the exception.

New car buyers are also making the decision about what vehicle to purchase based on the functionality of the vehicle and consumers needs and desires. Attempts are made to create a profile of the features desired by the average member of a particular type or group of customers. Are, for example, most minivan buyers residents of the suburbs with school age children? Do these suburbanites wish that they could control the heating and air conditioning by zone so that while traveling in the vehicle alone a driver is able to focus these functions into the front of the vehicle? Knowing the answers to questions like these allows an automaker to both design for the likely buyer and also market their new features to the most receptive audience.

The market segment for which price is of little concern is often a segment for which style and prestige play an important role in their buying decision. Designing for and selling to this segment of the market requires a different approach. It is a smaller segment of the market than the other two discussed but it is a potentially lucrative one as the high-end vehicles provide automakers with a much higher profit margin. They are more expensive vehicles to make and the money involved in building up the brand recognition that must go along with the high-end vehicle is also a costly undertaking.

As the auto market has matured and the penetration rate of automobiles has climbed, so too have the ways in which the market is sliced and diced by analysts to try and find ways to appeal to a particular segment within it.

RELATED ASSOCIATIONS & ORGANIZATIONS

Alliance of Automobile Manufacturers (AAM), http://www.autoalliance.org

American International Automobile Dealers Association (AIADA), http://www.aiada.org

Automotive Aftermarket Suppliers Association (AASA), http://www.aftermarketsuppliers.org

Heavy Duty Manufacturers Association (HDMA), http://www.hdma.org

Motor and Equipment Manufacturers Association (MEMA), http://www.mema.org

National Automobile Dealers Association (NADA), http://www.nada.org

Original Equipment Suppliers Association (OESA), http://www.oesa.org

Overseas Automotive Council (OAC), http://www.oac-intl.org

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see also Auto Parts, Trucks