Auto parts manufacturers endured a tumultuous year in 2009 as automakers, the industry's largest customer, suffered declining sales during the economic downturn. In that year, cash-strapped consumers delayed purchasing big-ticket items, including cars. As a result, demand from motor vehicle manufacturing plummeted. Due to demand for vehicles rebounding in 2010 in response to rising consumer sentiment, auto parts manufacturing plants ramped up production. As this trend continues, industry revenue is expected to increase at a significant annualized rate over the five years to 2014.
Automakers' troubles, especially those of General Motors and Chrysler, came from preexisting structural issues, such as high labor costs, excess production capacity and weak product offerings. These structural issues, according to IBISWorld Industry Analyst Brandon Ruiz, “along with declining demand for automobiles during the recession, exacerbated the problem for industry participants.” For example, “two of the largest auto parts manufacturers, Delphi and Visteon, struggled significantly during the period due to these conditions: Visteon sought Chapter 11 bankruptcy in May 2009, just months before Delphi exited a five-year stint in bankruptcy,” says Ruiz.
Fortunately, the downturn is expected to yield long-term benefits across the automotive sector; the recession forced automakers to cut costs, such as labor, and automakers are expected to be more profitable going forward. Furthermore, industry revenue is expected to grow in 2014 as consumer sentiment increases and consumers purchase more big-ticket items. These trends will bode well for the industry in the long run: the greater the demand for vehicles, the greater the demand for industry products. To this end, industry revenue is projected to climb at an annualized rate from 2014 to 2019.
Concentration in the Auto Parts Manufacturing Industry is low. In the five years to 2019, a full automaker recovery will drive industry growth. IBISWorld expects new car sales to slightly increase at an annualized rate over this period as consumer sentiment rises. Additionally, scheduled increases in fuel economy regulations will encourage auto parts manufacturers to develop lightweight, more efficient vehicle systems. Moreover, possible regulation of carbon dioxide emissions from vehicles would require expanded exhaust system capabilities. As such, auto parts manufacturers that are involved in developing these types of vehicle components have a smoother road ahead.
Read more at: http://www.prweb.com/releases/2014/03/prweb11672670.htm
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