In 2011, industry revenue is expected to grow 13.3% as vehicle sales continue to climb up from historic lows.
Los Angeles, California (PRWEB) October 26, 2011
Through 2016, automakers will find the light at the end of the tunnel, with uninterrupted growth in the forecast, according to IBISWorld, the nation’s largest publisher of industry research. The consumer sentiment index is expected to rise at an annual average of 4.3% over this period, reaching 95.0, up from 76.8 in 2011. Continuous improvements in credit availability and disposable income will encourage increased spending on new vehicles. As a result, industry revenue is expected to rise 4.2% annually to $102.3 billion with 5.0% growth expected in 2012. However, the industry is still in decline, and will struggle to return to prerecession revenue levels even at the tail end of the outlook period.
The woes of the Big Three automakers (GM, Ford and Chrysler) have been so deep during the past two years that they took desperate measures to get them back on their feet. Plant closures, suspension of research and development, drastic employment reductions and pleas for government bailouts have been the recent frontline agenda. Despite these measures, Chrysler and GM were unable to reduce debt to a viable level and sought bankruptcy protection in May and June of 2009, respectively. Also, Italian automaker Fiat and the workers' union United Auto Workers (UAW) bought out Chrysler, helping the company emerge from bankruptcy. Last, the US government took a majority stake in GM, which helped the company follow Chrysler's footsteps out of bankruptcy protection. According to IBISWorld analyst Antonio Danova, since 2006, these conditions have caused revenue in the Car and Automobile Manufacturing industry to fall at an average annual rate of 4.0% to total $83.2 billion. “In 2011, industry revenue is expected to grow 13.3% as vehicle sales continue to climb up from historic lows,” says Danova.
Falling car production and plummeting profit have also hurt the Car & Automobile manufacturing industry, with the Big Three automakers posting losses since 2006. While Chrysler and GM required bailouts, Ford controlled its debt. The Japan-based automakers operating in the United States (Toyota, Honda and Nissan) have a different story. Unburdened by legacy costs (such as pricey pension funds and union membership) and the erroneous belief that consumers would always demand big cars, Japanese automakers recorded strong sales and profit until the first half of 2008.
The future of the Car and Automobile Manufacturing industry seems more certain now that Chrysler and GM have been saved from financial failure. In 2011, industry profit margins will be a relatively healthy 2.1% as companies benefit from a combination of cost cutting enacted in 2009 and rising vehicle sales. All automakers will focus production on environmentally friendly vehicles through 2016 in order to become more competitive. Shifting consumer preferences, along with a general recovery in the demand for vehicles, will help industry revenue grow at an estimated average of 4.2% annually to $102.3 billion by 2016.
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