The Car Industry

The Automotive Industry

In the U.S., the 2007 market was approximately 15.9 million cars and light trucks sold, down from about 16.5 million the previous year. Production in North America, during 2006, including cars and trucks of all types, totaled 11.8 million produced in America, 2.6 million produced in Canada and 2 million produced in Mexico. Globally, about 53 million new cars were sold in 2007, up from about 49 million the previous year. These estimates are from Scotiabank Group.

There are approximately 244 million vehicles in operation in the United States. Around the world, there were about 806 million cars and light trucks on the road in 2007. By 2020, that number will reach 1 billion. Currently, those vehicles burn nearly 260 billion gallons of fuel yearly.

In the U.S., as of 2006, the industry included about 21,200 new-car dealerships, 1.07 million manufacturing employees and 1.12 million retail new and used car dealership employees. Total revenues at new-car and light truck dealers exceed $675 billion, according to NADA.

The years of 2004 through 2006 will long be remembered as a pivotal period in the automobile industry. It was a period during which high gasoline prices started a sea change among U.S. consumers that is finally creating significant demand for fuel-efficient vehicles. Gasoline prices of approximately $2.00 per gallon started taking a huge bite out of family budgets in 2004, and many middle-class consumers who owned fuel guzzling SUVs and pickup trucks began to wish they had vehicles that were much less expensive to operate. By 2005-2006, with gasoline prices in the $3.00 range, the party was over for traditional, large SUVs. While gasoline prices moderated during much of 2007, they were still in the $2.70 range in most markets.

One result was the phenomenal demand for Toyota's Prius hybrid car. Toyota responded by raising the price and planning production increases. Meanwhile, Toyota made investments in its Georgetown, Kentucky plant to enable it to manufacture 48,000 hybrid Camrys yearly there by late 2006—Toyota will likely wish it had created even more hybrid capacity. Meanwhile, there has been good demand for Toyota's Lexus RX400h hybrid crossover. Ford launched its first hybrids, and other carmakers, including GM, were greatly encouraged in their own efforts to bring more hybrids to the market. However, response to hybrids from U.S. makers has been lukewarm at best. Consumers generally aren't as impressed with U.S. hybrid technology as they are with that of Toyota models, and actual mileage results on the road have been disappointing, largely due to driver habits such as quick acceleration which uses more fuel.