Due to economic recession, low car sales had caused demand for automobile interior parts to drop in the US market. However, as the automobile manufacturing industry will improve over the next five years, the automobile interior manufacturing industry’s revenue will pick up, industry research firm IBISWorld predicts in its report. The research firm also comments that automotive sector is expected to globalize further, with imports and exports increasing. Thus, domestic automobile interior manufacturers will benefit from growth in worldwide demand.
As more efficient operations among the major automakers facilitated growth in vehicle production, demand for interior products has been sparked, and industry revenue grew 10% in 2011. In 2012, revenue is expected to increase 8.3% to $18.9 billion, according to IBISWorld industry analyst Antonio Danova. However, he notes, the growth will be unable to raise revenue to prerecession levels, yielding an average annual decline of 2.5% since 2007.
Over the five years to 2012, there was increasing demand for fuel-efficient vehicles, but domestic automakers stalled on production. Instead of responding to the shift in demand by manufacturing fuel-efficient cars, US automakers persisted in producing gas-guzzlers, says Danova. In addition, industry profit fluctuated drastically over the same period, as firms failed to combat rising costs in response to lower revenue, yielding lower profit margins.
Nevertheless, as a result of effective cost-cutting strategies, profit margins are expected to increase in 2012. Still, the increased costs of expansion and downward price pressures from automobile manufacturers will likely calm profit margins down to historical norms by 2017. Over the five years to 2017, domestic automobile interior manufacturers will benefit from growth in worldwide demand because of further globalization. Growth in manufacturing activity and export demand because of a weak US dollar will fuel sales to foreign markets, the report adds.