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Vehicle Trends–Cars Subject To New Enterpising Processes Of Thought In Order To Meet Projected Profits

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The industry of motorized vehicles is looking at some very interesting changes in order to address an evolving marketplace. The following article illustrates some of the surprising trends on the horizon for 2017.

The automobile manufacturer that is unable to improve upon its return on capital is in for a jolt of financial reality. The industry is provided with much more in the way of challenge than the average consumer recognizes. Global sales reached eighty eight million vehicles in 2016—and that is a record-breaking figure. The preceding record is up four and eight/tenths percent from the previous year. Profit margins for suppliers and automobile manufacturers, also referred to as OEMs are at a respectable ten year high. What does this mean? Matters are not always as they first appear and the industry is still challenged. This challenge comes from new technological innovations which continue to evolve-inclusive of pricier and pricier price tags.

The first argument is that total stockholder return, over the prior five year period, shows annualized rates of return that the S&P 500 and the “Dow Jones” Industrial Average arrived at for their clients—including dividends which posted at around fourteen and eight/tenths percent, and ten and one tenth percent rate of return, respectively. The average car producer was at approximately five and five tenths percent.

Secondly, the return on Capital invested in 2016 with regard to the top 10 Original Equipment Manufacturers posted at right around four percent—which is around 50% of the industry’s Capital cost. The main one-hundred suppliers have done slightly better. They beat their costs as to Capital, appreciating a positive return after many, many years of negative Net returns.

The numbers posted above almost nearly outweigh the positive earning postings. The image painted is one where investment is challenged, inside the automobile industry—in comparison to other industries. The assessment is suggestive then that there are, relatively-speaking, few boasters of investment fame, within the industry, projected for the next five year period and into the future.

The producers that will “shine their lights” will be those that learn the fundamentals of harnessing their own limited resources with regard to Capital. In order to do so requires creative strategies, and learning new ways to navigate around a technological landscape that continues to unfold and is unfamiliar.

Okay: rate of return on capital has been a challenge, within the vehicle industry, for a number of years. This challenge has made it impossible for the less creative producers to stay competitive. The answer lies in a more autonomous form of automobile technology.

The current and new innovative form of thinking with respect to the automobile is altering features of the provincial auto. The trend is that of increasing technological enhancements. A varied offering of digital services and power-trains as well as connectivity apparatus is putting pressure on the OEMs to produce newer and pricier parts, and components in order to gain in the way of greater functionality. The price what the Original Equipment Manufacturer, pays, in this regard, is high. The price point is 20 percent higher than what was required with respect to the prior generation of autos.

The preceding facts brings forth the idea of the car’s interior aspect. Until of recent date, the interior of the car has been highly stable in way of engineering and in the form of value with regard to the automobile. Currently, interior areas possess the potentiality, same as real estate, for very creative enhancements in the form of on-board entertainment and other attractive features—relative to safety. The new features are very technological in nature. In example, there are enhancements, trending, such as three dimensional laminated glass; reality displays—offering the driver with alerts, safety assistance and warnings, on screens that are invisible; however, appropriately embedded into the windshield of the car. These new stylized enhancements have entered the world of the traditional automotive supplier. Navigation and entertainment screens, on the car’s dashboard are providing the driver with information that is Web-based. There is a great deal of media and data that is being picked up from other cars. The autonomy of this type of technological enhancement changes the inside interior aspect of the standard auto. There is talk of a seat re-design similar to a conversation alcove in a living room while the car cruises to a preferred destination and seating arrangements are made wherein passengers face one another. Other ideas include having seats facing the windshield. The windshield area becomes a large screen for movies for the passengers.

The vehicular electronics may account for up to twenty percent of a car’s value within the next two years, which is up from only about thirteen percent in 2015. The innovation of software can take the auto of tomorrow and make it an exceptionally expensive purchase or endeavor.

The original equipment manufacturer and car supplier is embarking on resources in acquisition of newer forms of technology. The car producers are recruiting very skilled and special technical talent within the industry. Many of the technological features of today going into cars require the skill and knowledge of very experienced and knowledgeable software engineers. These engineers prefer dynamic work areas. Some of the mergers and acquisitions, as a result of the preceding fact, within the automotive industry have been conducted in order to augment a sleeker and more stylish work environment or area. In example, one German supplier paid an impressive 12 billion dollars, in 2015, to acquire a company in order to expand successfully into the connectivity and electronic safety market arena. The German outfit acquired a vehicle radar supplier in 2016.

The preceding fact easily demonstrates how innovative challenges reshape an industry that is very traditional from the standpoint of structure and business relationships. Investment decision making and industrial alliances that are being made currently determine which companies will acquire domination of the auto industry of tomorrow.

The safety and regulations with respect to environment is another concern inside of the industry. The potentiality of relaxing regulations, within the United States has provided hopefulness for the auto industry that higher costs relative to strict emission standards may move slower or possibly be avoided. The question, though, remains whether a change in the Federal regulations of the U.S., truly makes a significant difference, since individualized states in the United States and the European marketplace can still insist upon stricter regulations with regard to safety and emission control standards. In example, China now has emission standards in place much the same as what one may find in Europe. The true challenges, as to the environment, then remain; and eventually will require assessment and action–on the part of the car manufacturer and industry as a whole.

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