Automobile Industry

The auto manufacturing industry is considered to be highly capital and labor intensive. The major costs for producing and selling automobiles include:

* Labor - While machines and robots are playing a greater role in manufacturing vehicles, there are still substantial labor costs in designing and engineering automobiles. * Advertising – Each year automakers spend billions on print and broadcast advertising, furthermore, they spent large amounts of money on market research to anticipate consumer trends and preferences.
The auto market is thought to be made primarily of automakers, but auto parts makes up another lucrative sector of the market. The major areas of auto parts manufacturing are: * Original Equipment Manufacturers (OEMs) - The big auto manufacturers do produce some of their own parts, but they can't produce every part and component that goes into a new vehicle. Companies in this industry manufacture everything from door handles to seats. * Replacement Parts Production and Distribution - These are the parts that are replaced after the purchase of a vehicle. Air filters, oil filters and replacement lights are examples of products from this area of the sector. * Rubber Fabrication - This includes everything from tires, hoses, belts, etc.

In auto industry, a large proportion of revenue comes from selling automobiles. The parts market is even more lucrative. For example, a new car might cost $18,000 to buy, but if you bought, from the automaker, all the parts needed to construct that car, it would cost 300-400% more.

A significant portion of an automaker's revenue comes from the services it offers with the new vehicle. Offering lower financial rates than financial institutions, the car company makes a profit on financing. Extended warranties also factor into the bottom line.

Greater emphasis on leasing has