Auto Transportation

Posts Tagged ‘increase’

The rise in foreign investment has led to the rapid growth of automobile production, its export and developing of a more strong automobile industry. Overseas companies are making huge investments and are installing extensive production capacities in many developing countries. Today, the increase in the purchasing power and standards of living of people has resulted in the increased demand of automobiles especially four-wheelers in the developing nations. The fast pace of life and changes in lifestyles necessitates safer mobility for commuting to and from the work place and for traveling long distances. Research & development has resulted in increased productivity, better quality of automobiles and automotive accessories all across the globe. Low cost vehicles that are scooters and motorcycles have led to the massive growth of some of the fastest developing economies. The future of automotive industry in the developing countries seems bright and promising because of its further growth potential.

A lot of the major automotive giants are shifting their production facilities to almost all emerging markets with the main purpose of gaining better access and reduction in their production costs. According to the figures, South America and Asia have witnessed a boom in the past years. The various factors such as cheap financing and price discounts, rising income levels and infrastructure development have helped increasing the growth and development of automotive sector in the majority of developing countries around the world. The global automobile industry along with components and parts is expected to reach US$ 1.9 trillion by 2015, growth and it is thus evident that the economical potential of the auto industry is very high.

Reasons for the boost witnessed in the certain regions for the automobile industry are due to the availability of infrastructure facilities such like power supply, machinery, capital and availability of raw materials with efficient and relatively cheaper labor. Automotive industry is providing employment to a population of about 25 million people in the world. This industry not only provides millions of jobs to the people, but also produces billions of dollars in terms of worldwide revenues to many countries that are linked directly or indirectly with automobile industry.

This industry is developing new markets worldwide but major shares still remain in the prominent automotive manufacturing regions. North American regions like New England, New York and the Mid-Atlantic, Central New York, Pittsburgh/Cleveland, Western Great Lakes, St. Lawrence Valley, Ohio and Eastern Indiana, Kanawha and middle Ohio Valley, St. Louis, the Southeastern region, Gulf Coast, Central Florida, and the West Coast are the major contributors towards the automotive industry in the USA. The European Union has the largest automotive production regions in the World. The key automobile manufacturing regions are United Kingdom, Rhine-Ruhr River Valley, Upper Rhine – Alsace – Lorraine region, and the Po Valley in Italy.

The global automotive component industry is highly diverse and comprises of various product segments like engine parts, drive transmission and steering parts, suspension & braking parts, electrical parts and other auto components parts.

Transportation and Logistics (T&L) sector is bucking the trend with mergers and acquisition activity with deal flow on the increase.

The industry is facing a perfect storm with rising fuel costs, lower demand and excess capacity cutting into margins. The answer for a large majority of the well funded industry players has been acquisitions.

Customer diversification has been a key variable fuelling some of the appetite.  For instance, T&L companies servicing the automotive sector have seen loads and shipments drop-off a cliff.  Buying companies exposed to different segments of the industry allow idle or underutilized assets to buoyant segments. ”Organic growth in this market is tough – we’re relying on acquisitive growth over the next 12-month” says one industry executive.

Another variable fuelling consolidation is the customer seeking increasing choice and flexibility in terms of the service offering.  No longer do they want to deal with one company for their import/export needs, another for their domestic transportation and yet another for their warehousing. Customers want a one-stop shop.  Acquisitions allow a T&L provider to offer complimentary services virtually overnight.

Lastly, the value proposition to build economies of scale in the T&L space are compelling. Fixed costs on technology platforms and other revenue generating assets, once covered allow for every incremental dollar of revenue to flow to the bottom-line.

Real money is made in tough times. The challenge is in uncovering the opportunities amongst the turmoil.