Automobile Brakes Manufacturing
Business for Sale Industry Economics
2002 - 2021
2021 - 2027
During the majority of the five years leading up to 2021, demand for automobile brakes has increased. Original equipment manufacturing (OEM) companies, which import braking systems for new vehicles, and aftermarket industries, which provide braking parts to customers for servicing, are the two major markets for brake manufacturers.
Increased car demand and supply have been supported by increases in household income and consumer trust, as well as low-interest rates and pent-up demand. However, owing to the COVID-19 (coronavirus) pandemic and its economic effect, these dynamics reversed in 2020.
As a result, automakers have dramatically reduced demand to avoid stockpiling unsellable inventory, causing industry sales to plummet and canceling out other gains made during the time.
As a result, market revenue has declined by 0.3 percent annually to $12.1 billion in the five years leading up to 2021, with a 5.1 percent growth forecast in 2021 alone.
The performance of the Automobile Brake Manufacturing industry is largely reliant on the launch of new vehicles and the level of customer demand for replacement brakes.
Industry revenue was poor early in the five years leading up to 2021, after years of downturn previous to 2016. Industry sales have grown for most of the time thanks to the increased demand of new vehicles. Low interest rates and rising income levels boosted vehicle sales and demand, and hence brake part production.
However, continued import competition and a drop in business exports have started to restrict sales growth in 2019. The advent of COVID-19 (coronavirus) in 2020 caused macroeconomic conditions to collapse, resulting in a drop in demand for new vehicles and a drop in automaker production levels.
In addition to stay-at-home orders, this lowered demand for new brakes and aftermarket industry products, resulting in a 10.6% decrease in sales in 2020 alone, offsetting advances achieved earlier in the decade. For the five years to 2021, market revenue has declined by 0.3 percent on an annualized basis to $12.1 billion.
However, as the pandemic’s impacts fade in 2021 and more workers return to work, industry income is projected to rebound and rise 5.1 percent in 2021 alone.
Revenue for the Automobile Brakes Manufacturing sector is predicted to rebound strongly over the next five years, as the economy rebounds from the lows caused by the global COVID-19 (coronavirus) pandemic in 2020.
During the outlook era, new light vehicle demand, which had been relatively stalled in the five years leading up to 2021, is expected to recover. As the economy strengthens, falling unemployment and rising disposable income are projected to boost consumer confidence, promoting new car purchases.
Furthermore, low interest rates and potential stimulus could result in consumer borrowing costs that are relatively low. Furthermore, demand for replacement brakes is expected to increase, especially among aftermarket customers who have not had their vehicles adequately inspected or registered by 2020 due to stay-at-home orders making it an unnecessary cost.
As a result, there may be a surplus of unsold replacement brakes, as well as unsold cars in general, boosting market sales in 2021 as the industry recovers from pandemic-related slowdowns.
Unfortunately, rising input costs could become an increasing source of concern for automakers, with a variety of improvements in brake technologies and automotive legislation potentially altering operators’ cost structures and limiting profit growth over the next five years.
For major US automakers and other global automakers with manufacturing activities in the US, companies in this sector assemble and repair motor vehicle braking systems and related parts.
The Automobile Brake Manufacturing sector necessitates a moderate amount of capital. In 2021, the average brake producer will invest $0.22 in capital equipment for every $1.00 spent on labor. Over the five years leading up to 2021, this level of capital intensity has stayed essentially steady.
Brake manufacture, in general, necessitates a significant investment in manufacturing space and specialized machinery. Basic brake production equipment can last a decade or more, but it is expensive to replace.
Advancements in brake technology, such as regenerative braking and ceramic composite brake disc materials, need the acquisition of new equipment on a regular basis. By allowing the integration of electric motors and communication technologies, new specialized machines supplement older equipment.
From start to end, capital is employed to select plastic resin and carbon fibers, heat the materials in metal molds, cool the molds in water, drill holes in the molds, fuse the molds with silicon, and polish them into their final shape.
Despite the fact that brake production is primarily reliant on capital and equipment, brake companies routinely spend in research and development, which necessitates the hiring of highly experienced researchers and the purchase of research equipment.
As a result, labor expenses make up a large portion of industry costs, with the average compensation for an industry employee in 2021 being $56,451. The whole payroll of the industry is made up of other laborers, such as machinists and assembly workers.
Increased automation decreases the demand for manpower across the manufacturing process and is better suited to fashioning more complex parts, therefore brake manufacture will likely raise its present level of capital intensity over the five years to 2026.
Historically, revenue volatility in the Automobile Brakes Manufacturing business has been low to moderate. Revenue volatility, defined as the absolute average change in revenue over the five years leading up to 2021, is predicted to be 7.8%.
Brake manufacturers, in general, rely substantially on downstream demand from automakers, which results in revenue variations that are similar to those seen in other car manufacturing businesses.
When consumer confidence and household incomes dip, for example, light-duty car manufacturing decreases. While brake manufacturers make parts for both international and local automobiles, the three domestic automakers are the industry’s main OEM clients.
Brake makers have profited from an increase in new car production for most of the time. However, owing to the COVID-19 (coronavirus) pandemic’s consequences, this rise is likely to be entirely wiped out when vehicle demand plummets and the economy collapses.
The pandemic’s impact has caused an unusually high amount of volatility in industry revenue, with sales plummeting 10.6 percent in 2020 alone. Furthermore, the growing presence of foreign automakers has an impact on industry income.
Toyota Motor Corporation and Honda Motor Company, both based in the United States, employ locally made brakes during the automotive production process. Aftermarket part demand is influenced by a variety of factors.
Aftermarket brakes are designed to be installed in existing cars and are marketed to replace damaged or worn-out parts in accordance with conventional vehicle maintenance schedules.
Brake manufacturers who sell primarily to the aftermarket are less likely to encounter the same level of revenue volatility as those that provide primarily to the OEM market. Aftermarket brake sales, on the other hand, suffer when buyers put off purchasing routine repairs due to a lack of funds.