Transport Manufacturing: Background
Industry Composition:
These days, nearly everything a consumer buys comes from somewhere else, often from a great distance; thus the transport manufacturing industry is inextricably incorporated into our lives. The secret to Rome’s success was their road system, which enabled easy transport; similarly, without our now extensive transport infrastructure, as well as the machines which run on them, economies nationally and globally would collapse. Any company involved in the manufacture of commercial vehicles (automobiles, aircrafts, boats, or trains) or parts for these vehicles, is part of the transport manufacturing industry. Construction companies whose business is the manufacture of infrastructure, the systems on which vehicles travel as well as the terminals, ports, or stations at the end, are also considered part of this industry, although in regards to trends and performance they are like any other construction company. Companies involved in the design stage of these services fall under civil engineering and are included as part of our Business Services industry.
History:
The industry has undergone many changes since its inception. Horses have been replaced by automobiles; leading to increased capacity and decreased need of cleanup. Watercrafts, which were originally carved out of tree trunks, evolved first into steam engines and finally into modern ships of every size, from cruise ships to speedboats. Steam engines, an important mode of transport for both goods and people, have been converted into diesel or electric powered locomotives. The emergence of air as a means to transport people as well as goods is also on the rise and will continue to grow because of the speed it is able to move. Developments of these modern methods of transport have shaped the world we see today.
Leaders:
The production of the automobile is an industry segment that is very important to the individual consumer. Toyota and GM are on the leading edge of automobile production, followed by Volkswagen, Hyundai, and Ford. Toyota has succeeded in providing quality vehicles in every price and fuel economy bracket, and is the leading developer of hybrids. Also, whereas other companies have had to close domestic plants to cut costs, Toyota is doing the opposite. In fact, many companies have moved operations to the Southeast United States, reducing imports to the U.S. and the associated costs, and increasing domestic production. Leaders in supplying these companies with auto parts include companies such as Lear, Dana, Delphi, and ArvinMeritor. In the aircraft segment, Boeing and Airbus lead the pack.
Trends:
In the struggle to meet ever-changing demands, manufacturers have shifted focus on the research and development of energy efficient and eco-friendly products, such as reduced emissions engines and hybrid/alternative energy vehicles. This trend has become an important target because of a change in demand due to major pollution concerns and government regulations. While this mainly applies to the automobile manufacturing segment, Boeing has also taken steps in this direction to create more eco-friendly airplanes.
Another trend is the focus on redesigned supply chains and manufacturing processes. Auto companies have started to incorporate Toyota’s “lean manufacturing” policy, reducing cycle time and waste by developing more efficient processes. Additionally, a recent strategy in automobile manufacturing is incorporating add-ons such as GPS navigation, Bluetooth connectivity, and satellite radios, as a standard feature rather than an upgrade.
Major Issues:
Pollution has become a big issue in the transport manufacturing industry; most of the world’s petroleum is burned by this industry, leading to high levels of carbon dioxide and other greenhouse gas emissions. In 2006, automobiles were officially singled out as a primary source of adverse health effects due to air and noise pollution. Land and water pollution are an issue as well, with toxic runoff polluting ecosystems and water sources, and road systems infringing more and more on natural habitats.
On the manufacturer side, the price of inputs such as steel or plastics has increased due to increased global demand—cutting into profit margins. The U.S. industry is also being plagued with rising retiree pension costs, which are typically less of a drain for overseas companies. Additionally, escalating gas prices have weakened the industry demand by not only reducing sales, but also creating problems of excess capacity across the industry. Lastly, companies are forced to confine to new regulations for eco-friendly products. As governments focus on tackling this problem with stricter regulations, the manufacturing industry needs to meet a new standard.
Future Outlook:
The transport manufacturing industry has a good outlook as it emerges from the ashes of the 2008 financial crisis. Demand for the industry will revolve around employment opportunities, growing consumer income and expenditure. Specifically, automobile companies are experiencing global growth. The increased buying power of emerging markets such as Eastern Europe, India, and China represents a growing part of transport manufacturing’s business. These areas also present an enormous opportunity for growth in the next decade along with emerging markets where demand is rising for transportation.
As for commercial aircraft manufacturing, this sector is positioned for growth as air travel worldwide is expected to see double the number of passengers currently in the skies, by 2025. However, the positive outlook for the industry will face big hurdles as they deal with increasing government regulations and costs. Also, the success of the economy will have a huge make or break effect on the industry as it correlates with, and relies on, a thriving economy.