Industry Corner: Advanced Materials in Automotive Vehicles
Weizer, William P., Gross, Andrew C., Business Economics
IN SPITE OF the glamour of high-tech fields and the pervasiveness of the service sector, one mature manufacturing industry remains most visible and significant on a worldwide basis and especially in the U.S., Canada, Japan and Western Europe. This, of course, is the manufacture of motor vehicles. The making of automobiles, trucks and buses contributes about 4 to 5 percent of the gross domestic product in many industrialized nations.
While automotive production is determined chiefly by customer demand, how the vehicles are made is influenced deeply by government regulations. The rules cover fuel efficiency, exhaust emissions, accident impact standards and recycling of materials. Manufacturers of cars, vans and light trucks react to such requirements by adjusting material usage. In this paper we focus on the use of "advanced materials" in the production of automotive vehicles in the United States and Canada. Suppliers of such materials expect faster growth rates than that for vehicle production.
DEMAND CONSIDERATIONS (THE ECONOMIC ENVIRONMENT)
Overall consumer demand is the key driving force in the production of vehicles. The diffusion of advanced materials in cars, vans and light trucks is also highly dependent on the volume of vehicles purchased by customers, but many other factors influence adoption of these materials. These include government rules, corporate inertia, technology, and cost/benefit tradeoffs among different materials.
In the United States and Canada, "light vehicles" (i.e., cars, vans, light trucks) are seen as basic necessities for personal travel and commercial delivery. A level of general prosperity is required along with a highly complex infrastructure that ranges from highways to garage mechanics, from financing to leasing arrangements. These conditions, in spite of economic recessions, prevail in the two nations. The trends in vehicle registrations, demand, and production during a fifteen-year span are shown in Table 1.
Growth in demand to 17.5 million units by 1998 represents an annual increase of 3 percent per year, a respectable rate by the standards of developed regions whose automotive markets tend to be mature. Stimulating factors include the recent economic recovery and expansion. While much of the demand will be replacement oriented, there is room for further market base expansion in both countries. Demographic patterns, income levels, interest rates and the age of the existing stock generally will play a positive role in this regard during the 1993-98 period.
In the 1950s and 1960s, Canadian and U.S. buyers of automotive vehicles demanded roomy cars and slick styling; many firms prospered by offering these. But the concern with fuel costs and with environmental damage in the 1970s had a major impact on both
William P. Weizer is senior analyst at The Freedonia Group in Cleveland, Ohio. Andrew C. Gross is professor of marketing and international business at Cleveland State University, Cleveland, Ohio.
Table 1 Trends in Use, Sales and Production of Cars, Vans and Light Trucks, U.S. and Canada 1983-1998 (million units) Cars, Vans & Light Trucks % annual change (US and Canada)(1) 1983 1993 1998 93/83 98/93 In use (registrations)(2) 171.3 202.5 218.5 1.7% 1.5% Demand (sales)(2) 13.2 15.1 17.5 1.4 3.0 Production 10.5 12.7 14.3 2.0 2.3 1 Light trucks are those below Class 4; medium to heavy trucks are Class 4 to Class 8. 2 In use and registration statistics are not the same, because some vehicles in use may not be registered (farm, military, antique), but the discrepancy is small. Same holds true for the concept of "demand" and "sales." Source: Authors' estimate, based on manufacturers' reports, Motor Vehicle Manufacturers Association of USA, U. …