Automotive Franchise Industry Report 2012

Like pets, there is a segment of the population that considers their vehicle their “baby.” Although the first gas-powered cars were produced in Europe in the mid-1800s, most Americans, if asked, would likely point to Detroit, Michigan as the birthplace of the modern-day auto industry. The most famous pioneer of American auto manufacturing is Henry Ford, who – while not the first American car maker – revolutionized the assembly line process in the early 1900s leading to the mass production of vehicles.

Following the end of World War II, the popularity of automobiles soared to incredible heights. A new found affluence, in conjunction with advertising and technological advancements that made automobiles more desirable products, saw the American public as a whole become enamored with what some enthusiasts describe as “rolling works of art.” Different groups of vehicles such as pickup trucks, vans, sedans, etc., were eventually created to accommodate various uses in society. The love affair with these machines also led to the creation of even more subsets of cars, which played to tastes of different demographic groups, such as hot rods, street rods, muscle cars, low-riders, etc. The diversification of auto consumption didn’t stop with the product, however, as people began to gather and associate with those who shared their passion through car shows, various racing ventures, auto auctions, and other events.

Auto-related events, products, and services grew steadily in the post-war period, outside of a brief decline in the 1970s due to rising fuel prices and gasoline shortages. The growth of the industry, however, came to a screeching halt in the late 2000s. This is when the recession dealt the biggest blow the auto industry in its history, especially in the industry sectors of manufacturing and sales.

Along with the housing market, the auto industry was one of the principal victims of the 2008 economic crisis. At the darkest point of the crisis, Detroit’s “big three” auto manufacturers: General Motors (GM), Ford, and Chrysler were struggling to stay in business amid rapidly slowing sales, competitors from other countries taking market share, plunging stock prices, and giant financial losses in their operations that included decreasing cash reserves. It got so bad that both GM and Chrysler received government bailout loans; Ford received a line of credit in case they eventually needed a loan. Chrysler also eventually merged with Italian automaker Fiat to stay afloat. However, just a few years later the turnaround has been nothing short of incredible.

Currently, the U.S. auto manufacturing industry accounts for combined annual revenue of about $200 billion according to Hoover’s. This segment of the overall auto industry is very concentrated including approximately 200 companies, with the Big Three accounting for more than 90 percent of the total revenue. Along with the major companies, this segment also includes smaller boutique manufacturers and chassis manufacturers.¹   In addition, the annual revenue for various dealers (car, motorcycle, luxury, RVs) is over $650 billion. (Note: The revenue for the manufacturing of the parts and pieces needed to produce the vehicles is not included in any of these estimates nor is the revenue for wholesale service providers.)

¹ Automobile Manufacturing, http://www.hoovers.com/industry/automobile-manufacturing/1019-1.html

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