They also benefit from economies of scale because with increased demand and purchasing power they now buy components for six million cars, not three. Hybrid cars: the future? With fuel prices increasing, people aren't buying large cars in the numbers they used to. Small cars consume much less fuel, and are better for the environment. What is a hybrid car? It's a car that usually has two tanks for fuel.
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The car is started for a few seconds with petrol, meaning you have to re-fill your petrol tank only once every five months, even if you use your car everyday. Then the car runs on the alternative fuel. This causes less damage to the environment and is cheaper too. Some hybrids could combine a petrol engine with an electric motor, with battery recharge locations in towns.
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Why forests are green. Capital Cities. Compass Reading. Grid References. Map Bearings. Rainforest Vegetation. Test Troubleshooting. Describing Places. Between and , Japanese automobile companies doubled the number of model offerings from 45 to 90, whereas the United States had a modest increase—from 35 to 45 models.
In , the top-selling car model in the United States had sales of ,, whereas in the top-selling model, the Honda Accord, had sales of only , The top 10 models had total sales of 2. The Japanese automobile industry has followed a product-replacement philosophy based on short product cycles roughly half the time of the U. Short product cycles mean that vehicles can be adjusted to changes in the marketplace more frequently. Features that are more easily incorporated with major changes can be introduced more rapidly.
Tools and equipment that are model specific can be written off over the short life of the model. The best Japanese automakers have developed a production system that enables them to produce efficiently at a smaller scale than the American manufacturers while manufacturing products of high quality Womack et al. The annual production volume for the Japanese product cycle can be economically viable at levels as low as 50, units, compared with optimum production levels of , units for a U. The four-to-one difference in production volume enables Japanese automakers to provide four times as many product offerings from a single plant as a U.
The relationship between Japanese companies and their principal suppliers may also provide a competitive advantage for the largest companies in product development involving new technology. Japanese automobile manufacturers enter into long-term relationships with their principal suppliers and are bound together in business groups through joint-equity relationships termed Keiretsu. As a result of these long-term relationships, joint product development is possible.
In the United States, suppliers are involved jointly in only 14 percent of the engineering effort in new product development, whereas in Japan suppliers account for 51 percent of that engineering. Japanese firms also write off investments on key components, like engines and transmissions, more quickly than American firms. Toyota, for example, launched 14 new engines between and , fully depreciating its engine facilities over six years.
Engine and drivetrain life is at least 12 to 15 years for domestic companies; Ford, for example, did not launch a single new engine during the s. For example, the Honda Accord was redesigned in , , and In comparison, the Ford Taurus was introduced in , was significantly updated in , and is scheduled to be face-lifted in before being completely changed in based on presentations to the committee by Ford Motor Company. Thus, the Accord had two major redesigns in an 8-year period , whereas the Taurus is scheduled to have two major redesigns over a year period.
Chrysler's first completely new automobile platform since will be launched in the fall of The Japanese product-development strategy of small-scale production and extensive product diversity also has implications for the introduction of new technology. It allows Japanese companies to experiment with new technology on small-volume products before committing more broadly to the technology on many product lines. Moreover, because it is easier and more cost-effective to incorporate new technologies at the time of a facelift or model change, the Japanese will retain the ability to adopt some technologies faster than their American competitors.
The latter may provide a competitive advantage because it allows the manufacturer to augment its own technical skills with those of its supplier. Nonetheless, even considering this fact, the Japanese have been more effective at joint product development, particularly in cooperation among different industries as well as within Keiretsu structures.
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Although the American automobile industry has made some progress in introducing flexible manufacturing, it has failed to match Japanese levels of manufacturing and organizational efficiency. Improved factory operating efficiency and vehicle design have yielded higher quality and productivity, but that only partly closed the competitive gap. A recent study Womack et al. In comparison, Japanese plants in Japan had an average productivity of Cars assembled at the U.
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The gulf between American and Japanese manufacturers is narrowing but remains a troubling national problem. Access to cheap capital through the issuance of warrants and convertible bonds worth billions of yen during the late s supported Japanese investment in new plants and products. Although the domestic automakers also invested heavily during the s, much of the surplus cash was used for acquisitions outside the North American automotive market. In addition, cash was also used to repurchase shares in attempts to boost stock prices, on products and facilities for overseas subsidiaries, or on domestic facilities deemed necessary for the future of the business, such as the billion-dollar Chrysler Technology Center.
Despite record spending on domestic automotive operations, the industry must still invest to match Japanese production standards and to respond to the shift upmarket i. The prospect of lower vehicle demand, further losses in market share, and significantly higher fixed costs raises questions as to the domestic industry's capacity to fund investments to close the competitive gap with the Japanese and to meet the safety and emissions standards that have been enacted. Investments in fuel economy technologies that force the early retirement of models or components, or that must be accomplished outside the planned spending cycles, could place an untenable financial burden on domestic automakers.
Convertible debentures and warrant bonds were sold by Japanese companies to public investors, often at interest rates of 1 to 2 percent.
This enabled long-term projects to be financed despite low returns on investment. In contrast, the long-term U. The automobile industry is characterized by long lead times for major component systems, such as engines and transmissions, and complete vehicles.
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To determine the design and features of a vehicle or of critical components, a two- to four-year lead time is necessary for ordering specialized equipment and preparing manufacturing plants. Vehicle assembly facilities require a lead time of two to four years. The required lead time is affected by the extent of change in the vehicle and the production process. Three to four years are required to prepare for an all new engine or drivetrain U.
Department of Transportation, Some American automotive companies seemed slow to convert to new models and contemporary engine designs during the s. However, every automotive company is expected to spend a relatively large amount of capital on new products and facilities well into the s. In the process, a significant number of new models and four-valve-per-cylinder aluminum engines will be launched.
Because these new models and components are already set, the industry's ability to adapt to more stringent fuel economy standards prior to MY is limited. Nonetheless, there will probably be some improvement in fuel economy in these newer vehicles over their current counterparts. The industry relies largely on internally generated funds to provide the bulk of capital for investment.
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As a result, capital spending should roughly match depreciation and amortization of equipment and tools. The long life typical of domestic car lines 10 years or more and of major components 10 to 15 years results in a slow write-off of assets.
The product-development and depreciation strategies of domestic automakers—as well as significant spending into the early s—are a potential obstacle to investment for the rapid introduction of new technologies beyond those already planned. If fuel economy standards are enacted that make vehicles, production equipment, or key components obsolete before their normal retirement, the industry's financial condition will be compromised. Nonetheless, a long-term fuel economy standard or goal should be within the industry's capacity, as long as it does not distort normal product evolution.
Within 10 to 15 years, all current models and most engines and drivetrains will undergo at least one major change, and the equipment used in their manufacture will be written off. If fuel economy standards follow the industry's own product-development process, some, but not all, of the financial risk of the new standards would be reduced. It is difficult to comment about the ability of the automotive parts and materials industry to invest in fuel economy technologies. Once again, over a long period of time, such investments could be incorporated into the normal product programs of these companies.
If such investment created new opportunities—for example, in the application of aluminum and plastics—the beneficiaries would support necessary development and engineering efforts.