Auto Sales Fuel Other Industries

It’s been a hot fall for auto sales. They climbed 14 percent as gas prices dropped and more Japanese car models became available. In fact, analysts said that November had the highest selling rate in two years. And December is supposed to be better. Good news for the companies that make and sell cars.

But in business, as in life, it’s important to see how things connect together. Having a business administration degree is a great start to a career in management. Now it’s time to see how what happens in one industry can directly affect another. The auto industry is one of the most connected you can find, which explains why the government gets so concerned about how it does.

There are the obvious connections, like the legions of people it employs directly and through manufacturing contractors, and the massive amounts of steel, rubber, plastics, copper, aluminum, and other materials the industry consumers. Each of those breaks down into components, so now you add additional metals used in the steel manufacturing, a variety of chemicals — including petroleum products — in plastics, and so on.

They bring in mining, refining, and other processes. But the influence of the one industry extends further. How about semiconductors? Relatively few people realize how big a user of electronics components automobiles are. They have onboard computers to run the engine, various sensors for functions like tire pressure monitoring, and chips to control power use. According to research firm IC Insights, the amount of semiconductors in autos will go up by 15 percent this year alone.

There’s energy use, of course, in the form of gasoline. In addition to physical products, there are services. Relatively few people purchase new cars for cash; most get some form of financing, whether though banks and credit unions or directly from the lending arms of the automotive companies. There are mechanics, cleaning and detailing firms — even parking could be considered a service in a sense. Particular companies can also benefit. For example, SiriusXM Radio, the satellite radio service, depends greatly on automotive sales. At the end of 2010, the company claimed that 62 percent of cars sold in the U.S. were equipped with satellite broadcast receivers. As the number of cars sold increases, so do the number of people who could become subscribers.

Just as it’s important to consider the impact of inter-industry economic factors for the good, the connections can also give warnings of potential future jolts. The big reason for the jump in sales is that many consumers and businesses can no longer afford to put off a vehicle purchase. That caused a surge in purchases, according to auto site Edmonds.com, that will end in early 2012. Knowing that can keep a manager from getting blindsided and allow some planning to deal with the inevitable.

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