Auto Industry 101. Today: How big?

A growth market it is not

A growth market it is not

Due to the recent interest in disrupting the auto industry, here a short course in same. The course is bite-sized, and kept extremely simple, Auto Industry for the Twitter Generation. Those in the industry will find nothing new. Those new to the industry hopefully will find a helpful primer

The auto industry is one of the most complex and, next to pornography, one the most alluring in the world. How big is it? Statista puts the 2013 revenues of the world’s 17 largest automakers at 1.25 trillion euro, or 1.31 trillion USD. This number is skewed by the undervalued Euro. A year ago, and with a stronger Euro, the same revenue was worth 1.75 trillion USD. The global auto industry consists of some 50 players, and not of 17. Large companies such as Volkswagen, GM, or Toyota use the equity method for their China operations, China does not show up in their revenues. China is about one third of Volkswagen’s and GM’s business. It is probably a safe bet to estimate total worldwide annual auto manufacturer revenues at around 2 trillion $US. Total industry size, including ancillary businesses, such as parts, service etc., is probably twice that. That would be a generous $4 trillion, and a healthy chunk of business. However, it is not the $10 trillion that are frequently thrown around.

That was the good news.

The auto industry is more than 100 years old. Some of the first-movers, Daimler and Ford, are still alive. Thousands have tried to become an automaker, only to become a statistic. Darwin wasn’t gentle with this business. Only the strongest, smartest and meanest survived. Having gone through many shakeouts, the auto industry is one of the most mature markets on earth.

The auto industry is far from being a growth market. 10 years ago, 66 million automobiles changed hands throughout the world. In 2014, it was 88 million. That comes out to an annual growth rate of 3.4 percent. Compared to the hockey-stick growth of the smartphone market (not to scale) the car market looks downright boring. Big? Yes. Dynamic? No.  Welcoming? Not at all.

Growth markets are friendly to innovative newcomers. Flat markets turn into pools filled with hungry piranhas. The auto market appears even more hostile to newcomers who put their toes in the water when one looks at the regions where that anemic growth has been produced. Hint: It wasn’t America, Europe, or Japan. Last year, fewer cars were bought there than 10 years ago.

Tomorrow in Auto Industry 101: Whither the growth?