Top 5 Things the Auto Industry Has to be Thankful For

Includes: DDAIF, F, GM, LAD, ORLY, SAH
by: Jerry Marks

I hope you enjoyed your Thanksgiving weekend. says Thanksgiving is “an act of giving thanks; an expression of gratitude.” This got me thinking, what is it that the auto retail industry has to be thankful for? Below are the top five things I think the industry can “give thanks” for...

5. U.S. population growth

According to (the U.S. census bureau), there are ~300.3 million in the United States. Every 8 seconds a child is born, every 12 seconds someone dies, there is one international migrant (net) every 30 seconds, which all combined results in a net gain of one person every 13 seconds.

4. Global population growth

According to, there are 6.5 billion people in the world. Every second, 4.2 people are born, while 1.8 people die. This means every second, the world has (a net gain) of 2.4 people. On an annual basis, this equates to ~77.2 million net new people being added to the world every year.

The world population growth is a little more than 1.5% (annually), ebbing from its peak in the 1960s when the world was benefiting from reductions in mortality (likely due to advances in health care). But since the early 1960s, global population growth has been ebbing due to “rising age at marriage as well as increasing availability and use of effective contraceptive methods” (according to Nonetheless, nearly 80 net new people being added to the world every year means a lot of establishments (throughout the world) will be needed to sell, service, and manage these individuals transportation needs.

3. Hardly penetrated global transportation market

And out of the roughly 6.5 billion people milling about this world, according to Automotive News 2006 global market data book, there were only 66.15 million vehicles sold throughout the world in 2005. So if only 1 vehicle was sold to each person in the world (and some folks, particularly in the U.S. buy more than 1 vehicle per person), it means only ~1% of the world bought a new vehicle last year.

This is why I continue to believe global markets afford significantly greater opportunities (albeit commensurate with a higher level of risk) than the U.S., as something like 9 out of every 10 people in the world do not own their own vehicle, while here in the United States we average ~1.2 vehicles per licensed driver (US Department of Transportation data cited in previous notes).

So if you break apart the AutoNews data (based on 2005 global vehicle sales,) you see that: 1.1 million vehicles (1.7% of all vehicles globally), were sold in Africa, 17.9 million (27.1% of all vehicles globally), were sold in Asia, 3.1 million vehicles (4.7% of all vehicles globally), were sold in Central/South America, 20.4 million vehicles (30.8% of all vehicles globally), were sold in Europe, 2.9 million vehicles (4.4% of all vehicles globally,) were sold in the Middle East, and 20.7 million (31.3% of all vehicles sold globally) were sold in North America.

2. The world is getting richer

At Yaleglobal, they published an article by Robert Shiller from the Straits Times (November 14, 2006), where he said:

Among the 82 countries for which 2004 data is available, there has been really good news: Real per capita GDP has risen by an average of 18.9 per cent between 2000 and 2004, or 4.4 per cent per year. People generally are better off than they were just a few years ago. At this rate, real per capita GDP will double every 16 years.

Many people who could not afford a car in 2000 now have one, and people who could afford only one car in 2000 now have two. Those who could not afford to send their children to a good school or college now can. And so it is with many other goods and services that people consume.

So the propensity (and/or ability) for consumers to purchase vehicles throughout the world seems to improve as every year passes.

1. Technology, technology, technology

I have (and could) go on and on about how advances in technology are improving both the efficiency of auto retail establishments as well as the experience (improving the ability to meet customer demands/needs). For example, the internet has improved the ability to match consumers with retailers (far more efficient than mass advertising). Information systems can and should continue to improve new, used and parts inventory management. Online vehicle auctions (and even “wholetail” products like EBAY) have improved the efficiency of wholesaling vehicles.

And something that I think every auto retailer should be incredibly thankful for has been the advances in information technology allowing for greater systematization of administrative (human resource) and accounting functions. All of these advances should mean store personnel can spend more time focusing on the customer, and management personnel can focus more of their time on the development of the store employees.

But I don’t think we have seen anything yet. Remote vehicle diagnostics, e-tail, wholetail, “modular” vehicles, and even universal translation software are all “technological” advances I have thrown out as potentially changing the landscape of the auto retail industry (and the global economy in general). Now I want to hear your thoughts. Next week I am going to give you the results of the poll that has been up on the website for the last month or so. The question was where do you see the biggest potential bubble brewing in the U.S. economy? Obviously a number of you are smart alicks, because so far, nearly 20% of the votes have been for tulips. You have until Sunday night to cast your ballot.

Then on Monday I am going to issue a new poll, asking you to vote for what technologies you think will have the greatest impact on the auto retail industry over the next 5 years. So I was hoping if you had some free time, you could send me what technology you think could have a big impact on the auto retail space so the readers can vote. All entries will be considered. The best ones will be selected. I have two extra large t-shirts left (they went fast,) so I will send the two entries that I think are the best a free t-shirt. But I’ll leave it up to the readers to decide what they think are going to be the most influential technologies over the next five years. Please do not send me tulips as an emerging technology.