The United States (US) automobile industry is doing well. Honda USA Corporation exported over 20 percent more automobiles from the US than it imported from Japan last year. 2013 marks the first time a car manufacturer’s foreign-based operations exported more than it imported from the home country. However, while the US auto industry has flourished, the fuel industry, automobile companies’ mutually dependent counterpart, struggled with strong government interference.
Honda spent more than $2 billion dollars to expand its Marysville, OH. Production facility. The company’s US facilities manufacture Accords, Accuras, Civics, and Sport Utility Vehicles. Along with its plant in Marysville, the company has production facilities in Lincoln, Alabama and Greensburg, Indiana.
UC Berkeley professor, Harley Shaiken states that such production and exports illustrate that the US still manufactures goods for domestic and global markets. US manufacturing continued an overall decline however, falling by 16 percent since 2004. The US automobile market itself remained import heavy, with over 50 percent of cars manufactured abroad. Still, the automotive manufacturing industry showed signs of growth in the U.S.. Chrysler, General Motors, and Ford exported over a million cars in 2012, including 740,000 to Canada.
Honda’s exports from the US underscores the country’s role in foreign direct investment. Honda USA senior vice president Rick Schostek attributes last year’s accomplishment to increasing globalization over the past few decades. According to ValueWalk, he said that free trade and growth in US operations helped turn the US into a source of Honda’s cars, not just a destination. Honda primarily ships its U.S. manufactured cars to Russia, Mexico, and the Persian Gulf. The Accord, Civic and CR-V are the most popular models.
Other Japanese automobile manufacturers have reported strong increases from their U.S. Operations. Toyota and Nissan also reported a recent increase in exports from the U.S., with 45 and 37 percent increases respectively.
While the United States automobile industry is strong based on the increased exports, its related industry made up of fuel companies has faced struggles lately. The United States now produces 53 percent of the world’s gasoline, while depending more heavily than before on domestic sources for crude oil. As the price of domestic gasoline falls, domestic demand rises, discouraging US Government from easing export limits. Allowing more exports in turn reduces domestic supply, thus raising the prices for consumers. Senator Lisa Murkowski (R-AK.) joined Exxon’s vice president in calling for a reduction in the export limits as outdated legislation.
The alternative fuel industry faces challenges as well. US ethanol producers are looking for foreign customers as the Obama administration discourages domestic consumption. Analysts believe that US companies will export one billion gallons of ethanol, namely to Brazil. Brazil is the world’s largest user of ethanol as a fuel. It is also the biggest foreign competitor in the international ethanol trade.
Though the alternative energy industry has seen a decline over the last two years, industry officers are optimistic about profits. This comes mostly from reduction in the price of corn, ethanol’s main ingredient. Profit margins for ethanol at the start of this year were about 81 cents per gallon.
Despite promise, ethanol companies also face challenges related to exports. The European union, a major buyer of ethanol, imposed a five-year tariff of about $83 per metric ton on US ethanol. The European Union accused the US of dumping, which it denied.
International business always bears a sizable degree of struggle, for both companies in the US and abroad. Automobile Manufacturers contend with everything from raw material costs, to labor disputes, to protectionism. Fuel companies suffer much of the same problems, along with export controls and scarcity of oil or coal. Alternative fuel producers, such as those that trade ethanol, have similar struggles. All the while, if analysts can strongly leverage these obstacles with proper timing, they could maximize their profits in 2014.
By Ian Erickson