The automotive sector includes several types of companies besides auto manufacturers. Some of these companies focus on the component parts that go into cars and trucks. Other companies are responsible for vehicle sales, rentals or repairs. They tend to have cyclical stocks.
Original Equipment Manufacturers
Three kinds of companies manufacture parts used in automotive manufacturing. Although automakers produce some of their own parts, they also buy auto parts from original equipment manufacturers (OEMs). These OEMs put together items such as seats and door handles. Companies in the rubber fabrication business, on the other hand, specialize in items such as tires, belts, hoses, wiper blades, and seals. About 75% of the world's natural rubber production goes into making tires.
Companies in the third area, replacement parts, produce and distribute aftermarket replacement components such as parking lights, brakes, clutches, air filters, and oil filters. The manufactured parts are distributed through parts wholesalers, parts stores such as Pep Boys and AutoZone, online auto parts warehouses, car dealerships, and auto repair shops. Many smaller auto repair shops also run gas stations on their premises to service the fuel needs of auto customers.
OEMs, replacement parts makers, and auto manufacturers, in turn, obtain materials from manufacturers of stainless steel, glass, and increasingly, lighter-weight aluminum and plastic. According to the American Chemical Council, plastic comprises about 50% of the construction of a new car. Items made out of plastic include door handles, dashboards, seat belts, air conditioner vents, and some engine parts.
Electronic Car Component Manufacturers
The advent of electric cars has given rise to new types of car components. These include electric motors, lithium batteries, chargers and controllers, a type of mechanism that serves as a floodgate between the motor and the batteries. The electric car components are used by auto manufacturers as well as by a smattering of consumer enthusiasts who are converting their existing vehicles to run on electricity. Electric car components are distributed through specialists such as EV West.
Dealerships and Rental Agencies
New and used vehicles are sold at retail through car dealerships. Dealerships also help consumers obtain auto loans through financial institutions. Dealers typically accept trade-ins of preowned vehicles toward the purchase of new cars. Like auto repair shops, dealerships also diagnose and fix mechanical problems, perform emissions inspections, do bodywork and conduct routine maintenance services. When vehicles have been damaged in accidents, mechanical repairs and bodywork are often covered by auto insurance firms.
Rental car agencies buy fleets of vehicles from auto manufacturers at discount and then rent or lease the cars and trucks to consumers and businesses. Sometimes, they make arrangements to return the vehicles to manufacturers after a specified time period, although this practice has become less frequent in light of the more-careful market planning that has accompanied auto industry recovery since the financial crisis.
Traditionally, the vehicles bought back by auto manufacturers are then resold through used car dealerships. Alternatively, they are recycled through wholesale car auctions. When a vehicle reaches the end of its life cycle, its components are sometimes resold by used parts suppliers.