The Automobile Industry
Automobiles are a common form of transport in the United States. They are self-propelled machines, with a seat for the driver and two or more passengers. The automobile industry is a highly technical and complex system.
The automotive industry has struggled in recent years. Compared to motorcycles, automobiles have more room and can carry more passengers. However, they are also significantly more expensive. Moreover, the automotive industry is heavily indebted. This makes it difficult to make material progress.
In fact, most auto OEMs are indebted, including Honda. Even though the company’s free cash flow has been positive in recent years, the costs associated with EVs, autonomous vehicles, and electric car batteries could dampen margins in its core business segment. As a result, Honda faces challenges in its growth strategies. Nevertheless, it has a strong foothold in Brazil and India, and it has opportunities in other countries. For example, the company’s focus is on expanding its presence in neighboring markets such as Argentina, Colombia, and Brazil.
Automotive production in Japan and Europe soared after World War II, while it was slowed in the U.S. By the 1980s, the industry became global. But there are still many questions about the future of the automobile business.
For instance, the European Union has imposed stricter limits on the amount of hydrocarbons, nitric oxides, carbon monoxide, and other emissions from automobiles. And California has regulated hydrocarbon emissions on new cars and motorcycles.
But even in these areas, the legal definition of the word “automobile” is up for debate. Some people believe that a motorcycle is not a motorized vehicle because it does not have four wheels. While this may be true, there are plenty of riders who consider their motorcycles to be cars.
Historically, the automobile has been an answer to a dream of the 19th century. A self-propelling, self-driving carriage was considered impossible, but the first commercial three-wheeler was created by Edward Butler in 1884. He used a horizontal single-cylinder gasoline engine. His machine was capable of steering the front and rear wheels, enabling it to travel on both roads and dirt tracks.
After a long period of relative stagnation, the automobile industry began to expand again in the mid-1990s. Government subsidies and lower interest rates helped boost sales. Sales grew from 304,062 in 1990 to 571,580 in 1995. Yet, the number dropped 70 percent to 158,000 units in 1998. Fortunately, sales have slowly recovered and are now on a solid trajectory.
Although the automobile has seen a resurgence over the past few years, it is facing a tough challenge in the next five years. The introduction of electrified vehicles will negatively impact the sales mix. Furthermore, the manufacturing capacity of the company is severely restricted. Consequently, it is difficult for the company to achieve the high levels of profitability necessary for expansion.
With the growth of the Asian economy, automobile sales in Asia have surged. Currently, Asia accounts for over one-fifth of the company’s sales and it has a market share of more than 75 percent. Honda is confident that the market will improve in the next few years. It has begun to increase quarterly dividend payments, which will reflect improving conditions.