The automotive industry, past present and future

There was a time when the automotive industry dominated the market as much as modern technology companies do. The powerhouse Ford, the expansive General Motors or the innovative Toyota company all were seen as growing companies in the 90s & early 2000s. But this changed, as technology started to rapidly advance into the 2010s, the auto makers failed to keep up with the changing user demand and quickly became what some might refer to as corporate cripples.

The early history of the automotive industry

The beginning of the modern day automotive industry began in the late 1800s with the investigation of the gasoline engine. As more and more companies saw the expansion opportunity of automobiles this gave rise to early great auto-makers such as Ford & Rolls-Royce.

Ford alone stands out in history as moving this forward through ingenious use of the assembly line on the original Model T. Creating a vehicle which had a supply chain allowing more of the population to own a motor vehicle than ever before.

Around the same time that Ford produced the model T, General Motors was founded (1908) to begin what would become the world's largest automotive business in history. The power of these automotive companies was seen in the world wars. During World War II alone automotive firms produced almost $29 billion in military materials in the USA alone. This included trucks & jeeps for use by the military. The auto makers also helped in the production of machine guns, tanks, military helmets & bombs.

This helped to propel many of the major companies we see today into financial stability allowing them to leave the world war in an amazing state to shift back to producing automobiles for the masses. In 35 years following the war, output increased 10x and by the 80s & 90s every family owned a vehicle as it was no longer considered a luxury commodity out of reach.

Automotive industry in the share market

Ford motors goes into the stock market against its founders will

With vehicle sales booming and the passing of its founder, Ford Motor Company went public in January 1956. This initial public offering was the largest in the United States up to that time. Henry Ford himself always hated the idea of going public as he didn’t like to be in debt and saw his competitors GM move as a bad thing.

It doesn’t matter though, the company went to IPO and saw over 200 firms invest giving Ford a market cap of $3.2 billion USD at the time. Ford motors has since been on the market peaking in the late 1990s before falling rapidly in the 2000s. While Ford still maintains a value now higher than its original IPO, it hasn’t been an amazing investment over the past 63 years when compared to the S&P 500 index over the same period of time.

General Motors launches twice on the market

General Motors originally launched on the market in 1916 in what was seen as a bid to avoid going bankrupt. Eventually however this occurred anyway and these old shares became worthless. With it’s bankruptcy it was purchased and wasn’t brought on the market again for a long period of time.

In 2010 General Motors decided to once again enter the share market with a massive IPO. Initially following the IPO it seemed doomed to failure as prices remained fairly stagnant for years until a drop in 2020. Since then however, the price of the share has risen to unseen highs.

Tesla, the modern car

At the turn of the century, electric vehicles were beginning to become more popular and in modern day nothing speaks electric like Tesla Motors. Tesla entered the share market in June of 2010 at a price of $17(USD) a share. If you’d purchased these original shares you’d have been kicking yourself just a year later as they were worth less than $5(USD).

For the long term investors however, it’s paid off as Tesla has become one of the most dominant figures in the automotive industry and it’s share price is worth over $600 per share as of the writing of this article. An investment of just $1000 in 2011 would be worth over $100,000 today.

What is the future of the industry?

As most homes in Australia own at least one and in many cases multiple motor vehicles, it stands to reason that there remains a strong future for the industry. But can the automakers keep up with a modern person's demands for ease of access and adaptive technology?

For a long time cars used old style navigation systems such as Tom Tom which required a person to manually update the maps on occasion to have the most up to date information. But even with the most up to date road information, it still lacked the ability to provide real time information on traffic conditions and create the best route for commuting. People began to use their smartphones as their primary navigation devices because its features were real time and continuously improving. Only recently did cars start to be linked to the various internet based map technologies.

It’s likely that vehicles will always lag behind modern technology as it is costly and time consuming to update manufacturing processes within the factories to produce more high tech and modern cars. But most of the industry understands that change needs to come more often to keep up with increasing user demand in these technologies.

Many companies are offering electric cars or hybrid cars, but is this the future? Will a company ever harness a way to create a self sustaining car which never needs to be refueled or recharged in any capacity. This kind of technology could have a similar effect to the personal computer on the way that people live.

What about self-driving cars? Many companies such as UBER and Google are continuing to explore self-driving systems that will allow a driver to act as a passenger simply entering their destination and allowing the car to do the hard part. Self driving cars offer a unique proposition in that with widespread adaptation we could see a reduction in motor vehicle incidents as the cars would manage this themselves with no room for human error or fatigue. These self-driving vehicles are often seen as the future in commercial vehicles. The ability to be transporting goods continuously without need for rest would shake up the industry.

What other changes does the future hold for motor vehicle transportation? Will cars float above the ground and create multi-level highways as seen in many science fiction movies? Or does the industry fall as someone creates the ability to transport from one location to another instantly through a machine? These are likely, if ever, a long way off but it’s always interesting to dream and think about what the future may hold.

It’s a good idea to keep an eye on these emerging technologies as the company which delivers on them first is likely to see a rapid rise in its market value. We could see another opportunity for investment like Tesla to provide a 100x return. Or maybe we’ll see a company rise rapidly like Ford but then drift back down as they fail to maintain the speed and adaptability required in the modern marketplace.

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