United States automotive industry: opportunities for suppliers

United States automotive industry: opportunities for suppliers

Opportunities as a supplier for the US automotive industry

The United States of America has emerged as a healthy, steadily growing market for automobile manufacturers and prospects for suppliers, only look brighter. The current market trends in the US according to country data strongly predict automobile production growth to outpace its automobile sales growth. As the OEMs continue to increase the capacity,  production is also expected to rise consistently into the future.

Opportunities in the US Passenger Car Market

The North American Automobile Industry is one of the largest in the world, with a consistent rise in the number of passenger cars being produced every year. Country data shows that in the year 2012, over 7 million passenger cars produced the world over were bought by the US consumer. In fact, the Western European market which is considerably larger is expected to experience a sluggish growth pattern than the US over the next few years owing to the likelihood of a steep decline in the European Car Sales Market. The projections show a 4% fall in Western Europe and 15% rise in US' annual market growth.

Factors favouring the US

Factors such as a rise in the Japanese currency have rendered Japanese markets uncompetitive. This along with a favorable business climate in parts of the US has contributed to a phenomenal increase in their automobile production.

The US is considered a fertile ground for automotive industry suppliers to set up manufacturing units. An encouraging rate of automobile sales as exhibited through country data has resulted in a shortage of automobile production thus creating a need for imports. An effort to fill this gap has led to a marked increase in the domestic produce by foreign origin OEMs.

The United States as an ideal export base

Facts show that most European and Asian origin OEMs are considering the US as an export base. One can say without a shadow of a doubt that the US has become a potential market for suppliers in the automobile industry.

There is noticeable expansion in the supply network owing to consistently rising supply chain needs of the OEMs. Country data shows a huge inclination of these OEMs to set up units in the Midwest and southeast regions of the US due to a favorable political environment and historical reasons.

The phenomena of most foreign-based OEMs moving their production locations to the Midwest and the Southeast regions of the U.S. also has to do with the fact that the SA. offers :  

  • Better working conditions
  • Attractive incentive plans
  • Flexible labor policies
  • Conducive business regulations

Opportunities in the vehicle supply chain

The entire auto supply chain consists of a) Tier 1, Tier 2 and Tier 3 of players who specialise in part and component manufacturing, b) OEM’s who are the vehicle assemblers, followed by c) dealerships which deliver to d) the end consumers.

Tier 1 segment consists of close to 300 multinationals and is a crowded market with few opportunities. The Tier 2 segment involves R&D related to new solutions while fresh opportunities in sectors such as ICT are ever emerging. This segment is the one with maximum opportunities and it welcomes players with technical specialities in the areas of telematics, light weight material, electronics or innovative safety mechanisms. Tier 3 consisting largely of regional players, product differentiation is highly important to stay ahead of the already established competition.

Hence, a supplier should consider getting help from market research experts to facilitate entry into the North American market, depending on the demand and need gap being filled.

This entry in America was updated on August 2, 2017 by Content Factory.