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BERA - Business & Economics Research Advisor - A Quarterly Guide to Business & Economics Topics

Issue 2: Fall 2004: The Automotive Industry
Updated: March 2014

Retail

The sale of automobiles is a large segment of the overall U.S. economy. According to the 2007 Economic Census just in terms of number of establishments for new and used vehicles (NAICS codes 441110 441120) there are 51,731 establishment down just a bit from 51,731 reported by the 2002 Economic Census. The sales numbers however show a substantial change. In thousands, the sales figures according to the Economic Census for new and used dealers went from $693,840,253 in 2002 to $753,736,841 in 2007. The figures for Automotive Parts Dealers (NAICS 44131) followed a similar pattern of fewer establishments but bigger sales. The Economic Census for 2002 had this industry at $39,142,504 (in thousands) with 39,441 establishments and $42,916,881 (in thousands) and 38,233 establishments in the 2007 Economic Census. 1 Early figures for 2013 indicate that while auto sales had steadily increased over the last 4 years, they slowed a bit in 2013. However, 2013 sales were on track to have the best year since the Financial Crisis. 2

While most automobiles are sold in traditional brick and morter dealerships, the Internet is playing an increasingly important role the in shopping and purchasing process. Over the last 10 years, the Internet has continued to played an increasing role in the automotive market, and that role is only likely to grow. While new cars are generally sold by individual dealers via the Internet, the biggest market for used cars is through the big services. According to Ward's Dealer Business' 2004 edition of their annual e-Dealer 100 ranking, more than 80% of buyers go to the Internet at some point during their shopping experience with the number of Internet driven sales for the top 100 new car dealers going from 61,365 in their 2001 ranking, to 125,198 in 2004, and then rising to 148,657 in 2012. Of course that is a fraction of total car sales with is over 14 million in 2012. 3

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Table of Contents

Introduction
Automotive History
Global Automobile Industry
Automobile Manufacturing
    North American Market
    European & Russian Market
    East Asian Market
Retail
Company Research
Statistics
Associations
Industry News and Analysis
Electronic Resources

There are three big issues with regard to the sale of cars that need to be addressed. First, is the continuing popularity of SUVs. SUV sales have been and will continue to account for a large segment of vehicle sales even if the growth has been somewhat stalled for new vehicle sales. However, the new growth area in the SUV market are for the smaller SUVs - "sport wagons"or crossovers, that are an increasingly attractive choice for buyers. These models are making inroads for a number of reasons - perceived safety concerns associated with the larger models as well as their more car-like ride. According to an Automotive News article "Sport wagons are driving the industry" in the August 16 issue, "Sales of sport wagons totaled 981,646 in the first seven months of this year, up 18.5 percent from the year-ago period. July sales of 159,206 were up 16.3 percent from July 2003. " SUV sales are very profitable for manufacturers and accounted for $8 billion in 2012. However, the continuing high price for gasoline and the bad economy has made buyers rethink SUV purchases somewhat. According to Edmunds figures cited in a Bloomberg Business Week piece, in 2001 SUV sales accounted for 4.7% of sales and just over half a million vehicles - a figure that dropped in 2012 to 1.9% and just under 170,000 vehicles. 4

Second, is the desire for hybrid and electric cars. Prompted by high oil prices and a desire to be envirnomentally friendly among other reasons, this market is only likely to grow. While numbers for these types of vehicles are a fraction of the total number at present, hybrids in particular, are growing in popularity. For example, a June 7, 2004 article in Automotive News says that there was a waiting list of 20,000 for Toyota's Prius with an average wait time of five months. Other manufacturers are getting into this market with hybrids in the works or already for sale. Honda has a Civic hybrid, Nissan is coming out with an Altima hybrid and Mazda will have the Tribute and 2005 looks to continue the trend with several new roll outs with Ford introducing the Escape, GM introducing the Chevrolet Silverado, and Chrysler introducing a few Ram pickups. While production numbers for the future models are limited, the numbers are likely to grow. For further information on this topic please see the paragrapahs on hybrid powered vehicles in the Modern Automobile Manufacturing section of this guide.

The Financial Crisis that began in 2007 had a serious negative impact on automobile shopping for several years and accounts for the reduced number of car dealers and parts dealers. The economy has rebounded and that has improved car sales as well but data from the 2012 Census (available starting in 2014) will provide more clarity. There is also another trend to consider - Americans are holding onto their cars longer. This may be happening regardless, but it is not unlikely this does still have something to do with the shaky economy. The average length of time people hold onto their cars went from 10 years in 2008 to 11.3 years in 2013. While it won't get substantially older by 2018, IHS Automotive predicts by then the average length to hold onto a car will be 11.5. 5

Lastly, there are the factors that determine automotive purchasing. On top of the obvious pricing and incentive deals, many other local and national/international factors can affect retail sales of automobiles. Local automotive competition, plant closings and other substantial layoffs from local employers, and natural disasters, as well as national and international factors that range from interest rates, inflation, trade issues, oil prices to catastrophic events like 9-11, all of which can inhibit purchases.

There are many sources of material for retail sales information. Some are cited in the section devoted to Automotive History; others appear in the Statistics section, so please see these sections for futher sources. Also, much information on the retail aspect of the automotive industry can be obtained from articles which may be located through searches in portals or full-text databases.

Banks, Clif. "e-Dealer 100. " Ward's Dealer Business, April 1, 2004 v38.
http://wardsauto.com/special-reports/2013/2013-wardsauto-e-dealer-100 External Link

This is a relatively new annual begun in 2001.
Crull, Anna. Electric Vehicle Market : Is Now the Time? Norwalk, CT : Business Communications Co., c2000.
LC Call Number: HD9710.U52 S283 2000
LC Catalog Record: 2003272115
Contains information on the various aspects of electric vehicles from the technical to the general. Dicussions on government influence on development, specific industry participation, market, hybrids, etc. Also includes a glossary.
Directory of Automotive Aftermarket Retailers & Distributors. 2003- Tampa, Fla. : Business Guides, Inc. ISSN: 1545-1488
LC Call Number: HD9710.3.U5 D57
LC Catalog Record: 2003214256
Provides complete company profiles on over 2100 US and Canadian jobbers and retailers.
Finlay, Steve. "3 Big Trends Affect Dealerships." Ward's Dealer Business, April 1, 2004 v38

Fonda, Daren. "The Shrinking SUV: With safety under scrutiny, a fleet of cool crossovers is winning converts." Time, August 30, 2004 v164 p65.

Teahen Jr., John K. "Sport wagons are driving the industry." Automotive News, August 16, 2004 v78 p6.

GM and Chrysler dealership closures and restructuring : hearing before the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce, House of Representatives, One Hundred Eleventh Congress, first session, June 12, 2009. Washington : U.S. G.P.O. : For sale by the Supt. of Docs., U.S. G.P.O., 2012.
LC Call Number: KF27 .E5546 2009d
LC Catalog Record: 2012493950
Full text available from GPO [PDF format: 7.83 MB/ 235 p.]

Ramifications of auto industry bankruptcies. Pt. I : hearing before the Committee on the Judiciary, House of Representatives, One Hundred Eleventh Congress, first session, May 21, 2009. Washington : U.S. G.P.O. : For sale by the Supt. of Docs., U.S. G.P.O., 2009.
LC Call Number: KF27 .J8 2009c
LC Catalog Record: http://lccn.loc.gov/2009438870
Full text available from GPO [PDF format: 1.47 MB/ 182 p.]

This is part I in a series of hearings on the ramifications of auto industry bankruptcies and their effect on dealers and other issues.

Ramifications of auto industry bankruptcies. Pt. II : hearing before the Subcommittee on Commercial and Administrative Law of the Committee on the Judiciary, House of Representatives, One Hundred Eleventh Congress, first session, July 21, 2009. Washington : U.S. G.P.O. : For sale by the Supt. of Docs., U.S. G.P.O., 2010.
LC Call Number: KF27 .J856 2009f
LC Catalog Record: 2009526661
Full text available from GPO [PDF format: 396 KB/ 75 p.]

This is part II in a series of hearings on the ramifications of auto industry bankruptcies and their effect on dealers and other issues. Some focus on the impact on dealerships.

Ramifications of auto industry bankruptcies. Pt. III : hearing before the Subcommittee on Commercial and Administrative Law of the Committee on the Judiciary, House of Representatives, One Hundred Eleventh Congress, first session, July 22, 2009. Washington : U.S. G.P.O. : For sale by the Supt. of Docs., U.S. G.P.O., 2010.
LC Call Number: KF27 .J856 2009g
LC Catalog Record: 2009526662
Full text available from GPO [PDF format: 3.33 MB/ 286 p.]

This is part III in a series of hearings on the ramifications of auto industry bankruptcies and their effect on dealers and other issues. This is particularly focused on the impact on dealerships.

National Automobile Dealers Association (NADA)
http://www.nada.org/ External Link

The National Automobile Dealers Association is the association for automobile dealers. There is much there for dealers but there are also useful statistics under the NADA Data link including the Monthly Sales Recap, the publication NADA Market Beat, Dealership Financial Profiles, Automotive Retailing that is State by State, and used car guidelines.

 1. Retail Trade: Geographic Area Series: Comparative Statistics for the United States (2002 NAICS Basis): 2007 and 2002. 2007 Economic Census. (Table EC0744A2).

 2. Durbin, Dee-Ann and Tom Krisher. "Auto Sales Best in 6 Years, but Demand Seen Ebbing." January 3, 2014. Accessed January 3, 2012 http://abcnews.go.com/Business/wireStory/chrysler-sales-pct-2013-finishes-strong-21409285 External Link

 3. "WardsAuto e-Dealer 100 Sales Keep Growing" 2013 Ward's e-Dealer 100 (April 8, 2013) accessed January 3, 2014. http://wardsauto.com/edealer/wardsauto-e-dealer-100-sales-keep-growing External Link

 4. Higgins, Tim. "The Slow, Profitable Death of GM's Big SUVs" Bloomberg BusinessWeek September 26, 2013. Accessed January 3, 2014 http://www.businessweek.com/articles/2013-09-26/large-suv-sales-stall-but-general-motors-still-profits External Link

 5. Ramsey, Mike. "Cars on American Roads are Older Than Ever." Corporate Intelligence (blog post), December 26, 2013. Accessed January 3, 2014 http://blogs.wsj.com/corporate-intelligence/2013/12/26/cars-on-american-roads-are-older-than-ever/ External Link

Last Updated: 3/24/2014

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