The Net's Best Services, Programs, Software, and More!

Internet Security

Smart Cars Good News But Pricey

Smart Cars Good News But Pricey..

Your car may soon know how far it is from the vehicle in front, beep at you if you're too close, brake, tighten your seatbelt and adjust your seat so the airbags give you maximum protection if you still crash.

Good news for the makers of high-tech auto electronics, and for reckless drivers, but executives in the auto parts industry are worried that higher demand for sophisticated components will not necessarily translate into higher profits.

While cars are getting increasingly clever, consumers are demanding them at ever lower prices. That means higher sales for the car parts industry but more pressure on profits.

Auto automobile manufacturers are under severe pressure in terms of profits in the industry. The opportunities to increase profits on the price side are zero because today's competition is so fierce.

Continental, which makes onboard computers that intervene to keep a car on the road if they sense the driver is losing control, expects double-digit sales growth for its electronics over the coming years but says it is too early to predict whether that will mean higher profits.

The auto industry has long warned it faces a crisis if auto makers hit by weak demand keep forcing suppliers to charge less, with one industry expert earlier this year saying some 40 percent of publicly-listed companies in the sector in Europe, the United States and Asia, were in financial trouble.

Even such industry stalwarts as ThyssenKrupp, the German steel and engineering group that provides raw materials and components for car firms including Volkswagen , said they are constantly under pressure to cut prices.

The price pressure from automobile manufacturers is a never-ending story. Every year there are fresh demands for up to 20 percent cost savings.

The Automobile Positives

While industry executives bemoan the constant pressure to drive down prices, one area where they see a brighter future is higher outsourcing of production by carmakers.

BMW launched its new X3 small sports utility vehicle at the show, a car built in Graz, Austria, by Magna Steyr, the European vehicle assembly unit of Canadian auto parts maker Magna International Inc.

French car part maker Valeo, which makes headlights, clutches and windscreen wipers, said at the show it had been picked to be one of Japanese carmaker Nissan's top six suppliers, which could include outsourcing of activities Nissan was formerly doing itself.

There is definitely a general trend of outsourcing more and more from automobile manufacturers to tier one suppliers because there is such a variety of models.

As demand for traditional saloons and hatchbacks reaches a peak, automobile manufacturers are increasingly turning to niche segments like coupes, convertibles and minivans to boost their volumes and turning to suppliers to put them together.

Growth in the car market is coming from exploiting new segments. This seems to be a huge burden for car automobile manufacturers (if they do not outsource), said Continental's Ziebart.

You will find much more on this topic at WorldsLargestNetwork.com