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The Global Automotive Manufacturing Sector

(Source: CESA)

By: Guy Streeter, Kevin Rivas De Paz, Sophia Martin, and Dana Orkin

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I. Introduction

The Industry chosen for this case study is the automotive manufacturing industry. The

purpose of this case study is to evaluate the industry using the structure-conduct-performance

(SCP) industrial organization paradigm. An assessment of the basic market conditions will also

be included to relate market structure, conduct, government policies, and the market

performance.

The automotive industry keeps growing and innovating. “There are currently 253 million

automobiles on the road currently”.(Hirsch, 2014) The automotive industry is known for being an

industry that is always innovating. When you look at the cars from just 10 years ago there has been a

significant increase in the technology that each generation of cars has come with. One of the latest

technological car manufacturers are working on is autonomous vehicles. Tesla the manufacturer of of all

electric vehicles announced their automated driving features on October 9th. The computer controlled

driving is being developed and they expect to have fully autonomous cars ready within the next five to six

years. Other companies that have been working on autonomous vehicles is Google, which includes a

parallel parking feature. This is just the beginning of the technological changes that we will be seeing in

the future with automotive manufacturers.

One article written in the Wall Street Journal was titled “Super Glues Are the Secret to

Making Cars Lighter” by James R. Hagerty and Mike Ramsey. Car manufacturing companies

such as Ford and BMW are expanding their manufacturing use of adhesives in their cars instead

of welds, rivets, screws and bolts. This process will lower the weight of the cars so that they can meet

fuel economy requirements. The technological revolution has recently taken its course in all markets,

especially the automotive industry. It is very plausible to see that adhesives are in our future.

______________________________________________________________________________

II. Basic Market Conditions

I. Automotive Manufacturing Industry History

France and Germany were the first two companies to lay the groundwork for the

automotive blueprint as we know it today. Oldsmobile was the first automotive company in the

US starting in 1897(History). U.S improved the process of automotive manufacturing utilizing

mass production with interchangeable parts. Henry Ford’s entrance in the industry in 1903(Ford,

2014) spurred new product pricing and product strategies geared to customers. Ford also started

the first mass produced automotive in 1908 introducing the Ford Model T. This was a simple

machine with very strong steel for the critical components due to the lack of paved roads in the

United States at the time, only 18,000 miles worth. At the time a car was a luxury and you had

many options to choose from making other companies at the time practice a differentiation.

Henry Ford decided to segment his market to the common person and put a vehicle in everybody

else’s possession. GM(who bought Oldsmobile in 1908) and Chrysler adapted this ideology Ford

laid out in terms of the mass production line. This strategy carried out for the “Big 3” into the

1920s.

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The automotive manufacturing industry progressively grew with new technologies

introduced to card. New options like the starter as opposed to the crank, the all-steel body as

opposed to wood, the high-compression engine, hydraulic brakes, syncromesh transmission, and

low-pressure balloon tires all coming in the 1920s. The highlight upgrades for the automotive

industry were the automatic transmission and the drop-frame in the 1930s. Cars remained

relatively the same as far as technology was concerned into the 1950s.

Cars in the 1960s started to form the automotive industry as it stands today. There was

tons of pollution, big block motors, and comfortable rides at the cost of safety and quantity. This

is the changing point in the automotive industry moving forward to the modern day. This helped

shape the safety standards everyone and to shape the creation of more fuel efficient and

alternative fueled vehicles. This also helped to shape the quality standards we see today as well

as the lean production of factories. This progressively improved steadily until the introduction of

hybrid powered vehicles in the early 2000s. This brings us to the creation of the fully electric

vehicles we have come to know surface in the late 2000s into 2010 to the present.

2. Market Definition

The automotive industry is composed of many companies that focus on specific factors of

building an automobile, such as, interior and exterior design, advertising, manufacturing,

research & development, etc.

Product differentiation is essential in the automotive industry. For example, 2013 Ram

1500 SLT replaced the stick shift with buttons. Car companies are constantly evolving their

designs to keep up with today’s technological society. Electric-powered automobiles use pricing

strategies to differentiate themselves. By lowering the price, electric car automakers are hoping

to attract consumers. Henry Ford was the first in his industry to apply vertical integration using

assembly lines into his business model. By doing so, he managed to survive comfortably through

the Great Depression.

The NAICS market definition for the automobile industry is very important to the

industry. It is just right in terms of the product, but it is too narrow in a geographic scope,

because it does not take into account the manufacturers outside of North America. The census

data will be a useful source for us because there are many international companies that

manufacture in North America.

The last couple decades have experienced an international alliance between automobile

companies. The rapid sequence of mergers and acquisitions finally became significant to disrupt

the automobile industry by influencing a movement for other companies to follow suit and

pursue deals.

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(Source: IBISWorld)

3. Market Size

The total revenue of the U.S car and automobile manufacturing industry is around

$102.3billion. Growth in this market based on revenue is predicted to be at 2.4%(IBISWorld).

While profit of this industry totals $2.9 Billion. The top 4 firms in the automotive manufacturing

industry accounts for one-third of the global GDP(IBISWorld). There are 202 businesses in the

market.

The top five manufacturing firms in the United States are General Motors Corporation,

Toyota Maker Corporation, Ford Motor Company, Hyundai-Kia Automotive Group, and Honda

Motor Co. LTD. General Motors Corporation is the largest of the automotive manufacturers in

the market with a 20.4% share of the market. The brands they manufacture are Chevrolet, Chevy,

GMC, Buick, and Cadillac. Toyota Motor Corporation has a market share of 18.1%, Ford Motor

Company has a share of 15.8%, Hyundai-Kia owns 8.7% and Honda Motor Co. Ltd. has 7% of

the market. The other 30% of the market is shared by smaller manufacturing firms. As this

industry continues to rebound from the recent recession the growth rate of the industry is

expected increase in 2015 by 4.6%.

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(Source: IBISWorld)

The automotive manufactucturing is very large and takes place mostly outside of the United

States. Only 18% of automotive manufacturing locations as a whole are located in North

America, which translates to even less in the USA.

(Source: IBISWorld

4. Technology

The technology used in the industry is known to have sweeping innovations that every

manufacturer then starts to implement. Almost every manufacturers have started using robots in

combination workers to produce more vehicles. This use of robots and technology allows

companies to spend less on wages for workers that would have been used before the robots were

put into place, allowing them to have a greater profit. The investment in these technologies for

auto manufacturers has been substantial because they know that in the long run the

implementation of this technology will greatly reduce costs. Many manufacturers today have

complex systems in their cars to aid the driver. These technologies started first with the luxury

vehicles like mercedes benz and after the cost of these technologies went down more and more

manufacturers started implementing the tech like self parking, blind spot detection and break

assistance. (Auto Alliance) A relatively new technology that is being implemented in the auto

industry is autonomous driving vehicle. Tesla motors CEO sees a fully autonomous car being

ready in 5 years. Tesla is a leader in technology advancements so with Tesla being almost ready

to produce autonomous then like the industry has currently been going other car manufacturers

will be offering autonomous vehicles a little after a current leader has come out with technology.

(Ramsey)

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5. Substitutes

There are many substitutes to automobiles these include motorcycles, public

transportation, bicycles, and walking. All of these substitutes in the US are not used readily. The

public transportation industry in most of the United States is not as developed as other nations

which means that cars are the main mode of transport in the United States. In other countries the

public transportation is a lot more developed offering busses, high speed rail, and bike lanes.

(Richard)

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Market Structure

1. Number of Buyers and Sellers

There is approximately 202 automobile manufacturers in the entire world. Most

developed countries have a high number of cars per capita resulting in a high market demand.

The five largest firms in this industry are General Motors Corporation(20.4%), Toyota Motor

Corporation(18.1%), Ford Motor Company(15.8%), Hyundai-Kia Automotive Group(8.7%), and

Honda Motor Company(7.0%). The concentration ratio of these five firms is 70% of the

industry. This shows a moderate concentration market share. But this concentration limits us

from seeing the state of the remaining firms in the industry and an accurate ranking of degree of

competition for each firm in the industry. The Herfindahl-Hirschman Index(HHI) is a better tool

to assess the level of competitiveness and provides a general idea of the industry’s structure.

These market shares have remained pretty much stable over time except for the change in

mergers that have lowered the concentration within the market. This is shown through the market

share of automotive manufacturers since the year 2013 with the following market shares: (GM

17.9%, Ford 15.9%, Toyota 14.4%, Chrysler 11.6%, Honda 9.8%, Hyundai-Kia 8.1%, Nissan

8%, Volkswagen 3.9%, Subaru 2.7%, BMW 2.4%, Damier 2.2%, and Mazda 1.8%) - *(Statista).

Dealerships are also a buyer of automobiles. Dealerships buy and sell new and used passenger

vehicles and act as a middleman between the automotive manufacturers and the everyday car

buyers. The dealership market is a massive one earning around $799.5 billion and profiting

around $18.4 billion. (IBISWorld) Most dealerships in the united states are highly fragmented

with the two leading industries only accounting for 4% of the Market, inventory purchases make

up a large percentage of expenses because they spend a lot purchasing the automobiles. (Ibis

World) Recently Tesla won a direct to sales court battle in Massachusetts. Tesla motors a smaller

automotive company only sells its vehicles directly and this has upset many dealerships because

they were unable to get Tesla to sell them their cars. The dealerships tried to stop tesla from

selling the vehicles directly to consumers because they said it cut into their sales. Many courts

are ruling in favor of Tesla and this includes the state of Massachusetts. (Ramsey)

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Year # of Firms CR4 CR8 HHI (for 12

firms)

2013 12 59.8 89.6 1,177.13

*(Numbers from Statista Source)

(Source: IBISWorld)

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2. Barriers to Entry and Exit

There are high barriers to entry in the automotive industry. The capital of the firms in the

industry are high and for firms to enter into this industry and attempt to compete with highly

developed firms. Especially with the technological advancements that these big corporation

make it is difficult for firms to enter and compete with this changing industry. Established firms

have lower cost structures than entering firms which are at the advantage of surviving in this

market. As discussed in the Wall Street Journal, these major companies like Ford are more

frequently using adhesive glue for there cars. Companies who enter this industry may not be as

knowledgeable of adhesives and would already be at a disadvantage to the major companies.

Along with adhesives car manufacturing companies need advanced equipment that may be

running at a low supply or high cost. Many manufactures tend to have long standing contracts

with equipment suppliers, which may be difficult for newer firms to build trust without any

outstanding relations. Along with supplies, entrant companies need a lot of land and floor space

to establish assembly plants. Even the labor force is difficult to obtain for these entrant firms.

The workforce needs to be licensed to build the design for the cars so that they are an efficient

model and up to scale on safety and environmental requirements.

In the recent years there has been a number of new firms to enter this industry. Since the

market is so competitive to enter the new entrant firms have specialized on a progressive agenda

of electrically powered cars. Coda Automotive and Wheego Electric Cars are two of the newer

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firms to enter the industry based on the new electrical powered feature. Tesla is another firm to

enter the industry which focuses on sporty racing models.

(Source: IBISWorld)

3. Cost Structures

The minimal profit earned by the big three domestic automakers has prevented from

making a comeback because there has been weakened demand and structural inefficiencies. The

recent bankruptcies of general motors has forced new contract negotiations with unions that

eliminated pension liabilities. In 2014, automakers are expected to turn a profit of about 2.8% of

revenue. There are many components that need to be purchased in order to generate automobiles

purchases are about 78% of the industry costs. Wages make up the biggest part of the industry

costs taking 5.1% of revenue. The top three automakers have been trying to maintain profitability

with these expensive labor unions. Unions are responsible for keeping wages high. Research and

development is also another part of the cost structures it makes up 3.0% of the cost. R&D is used

to obtain a technological advantage due to no real monopoly and heavy competition. Auto

manufacturers don’t publish their costs so determining the minimum efficiencies of scale is

difficult. One of the smaller car companies that is successful is Tesla even though they are

considered small they are still made $932 million in revenue for the last quarter they are also

planning on producing 35,000 cars (Tesla) . In order for a company to have a economies of scale

in the auto manufacturing industry they must either produce a lot of cars or produce a few

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amount of cars that will sell for millions. Bugatti is an example of a car manufacturing company

that has been successful in producing super high quality cars that sell for over a million dollars.

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(Source: IBISWorld)

4. Differentiation

With such a large global market, the automotive manufacturing industry uses various

tactics tailored to specific demographics. Every car serves a specific purpose. Passenger vehicles

are built to commute passengers safely from A to B daily activities, SUV’s and vans are built to

support a larger group of people and use accessories such as inlaid tv screens on the back of front

passenger seats to provide families with a comfortable and entertaining commute. Pickup trucks

are produced to move large loads and often used by small businesses especially in the

landscaping industry. Utility vehicles are heavy duty commercial vehicles used by large

businesses that handle large orders or finished products or raw materials.

From an aggregate outlook of the market automotive companies are differentiating their

services in the technological side of cars. The rate of technological change in the global

automotive manufacturing industry is very high (IBISWorld). The two drivers in this instance are

the use of the internet and supercomputers to design every aspect of automobiles and be able to

test them and make changes instantaneously. This allows auto manufacturers to be able to

address pressing issues with recalls and to improvements to model years, and everything

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inbetween. Another trend in the technological change is the more fuel efficient vehicle trends.

from the “more efficient, greener vehicles”(IBISWorld). The push in this industry is to get more

efficient in hybrid, electric, and hydrogen powered automobile engines. This not only increases

fuel efficiency that consumers crave with increasing gas prices, but it also cuts down on

greenhouse gases. Right now hybrid vehicles own the biggest share of the vehicles

manufactured. Some automotive manufacturers want to stick with the hybrids as they are the

cheapest “green” vehicle to produce. Others choose to pay the higher costs to engineer fully

electric vehicles, which is the long-term goal of the automotive industry(IBISWorld).

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5. Vertical integration

(Source: IBISWorld)

The major players, especially GM, have their

own production process and retail locations, but

extend their business outside of the industry for raw

materials such as metals and fabrics.

Vertical integration allows automotive

industries to cut costs by having their own plants,

mechanical support, transportation vehicles, and

company retail locations. Some automotive

manufacturers sign agreements with outside

dealerships to spread their products out

geographically.

6. Diversification

Automotive manufacturing companies have

seen most of the growth of the automotive industry

was from diversification. Companies in this industry

tend to merge and acquire other companies in order to

diversify which is shown through feedback loops.

Examples of this are Ford acquiring Mercury, which

was purchased in order to be the mid-priced section of the Ford Motor Company. Also Ford

acquired Lincoln, who was purchased to be the upper-mid-level priced vehicle segment. Also

with the as well as producing more vehicles, automotive manufacturing industries also

differentiate their products with customizable features.

Automotive manufacturers guard themselves against market failure by introducing

modern technology in their vehicles. Modern technology is a reference to the iPhone, iPod and

bluetooth compatibility, Many cars are now introducing technology that allows the car to

practically drive itself with cruise controls and the ability to parallel park on its own. Touch

(Source: Strategicmanagementinsight.com) screens and LED tv’s are a popular accessory

incorporated in the manufacturing process. Driving performance is another area where

automotive manufacturers focus on for the customers concerned with safety, speed, comfort. Car

manufacturers are also concerned with green manufacturing and sustainability by working on

fuel efficiency and environmentally friendly vehicles. Buyers have the option to drive cars that

can operate both manually and automatic by the touch of a button opposed to the aged stick shift.

These areas of diversification serve the automotive manufacturers interest in bloating revenues

and maintaining brand loyalty among buyers.

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IV. Conduct

1. Pricing Strategies

As most of us know cars are not cheap to make and cannot be sold at an easily affordable

price. But with high demand for cars in todays era consumers price shop for the most affordable

car. Automobile manufacturers find ways that they can sell their cars in a more attractive manner

to consumers through different pricing strategies. All firms in the industry offer plans where the

buyer can send lower monthly payments, leasing, to obtain the car right away. Firms may vary in

pricing strategies in the following ways:

● Pricing Discrimination based on social class - Some firms offer deals to a variety

of different consumer segments such as college students. Ford is currently

offering a deal to full or part-time college students where they can save $500 if

they buy or lease one a model from the last two years just for being enrolled at a

college. Firms like ford understand that college students have extremely high bills

from tuition and rent and give deals like this to differentiate themselves from

other firms in the industry and to attract this selected consumer group. (Ford)

● Premium Pricing - Many firms set a high price for a new model to impress the

consumers view of their new car. If a new model for GM comes out at the same

time that one from Ford comes out and is priced higher the consumer market will

assume that the GM car is of higher quality. Firms keep their pricing high to

encourage favorable perceptions amongst buyers.

● Bundling - Many firms offer different versions of the same car to promote

bundling to raise revenue. A firm may offer a car with a package that comes with

a rear view camera, heated seats, and a blind spot information system for only

3,000 than a the model without these features. These pricing bundles are more

elastic for consumers and this price discrimination strategy has been known to pay

off well for automobile manufacturers.

● Used Cars- Since consumers are always looking for the next model from the

leading car manufacturers, depreciation is huge in this industry. The price of a car

each year depreciates a substantial amount since there is a new model of that car

out with more impressive features. But not all consumers have the ability to buy

the newest model and wait for the price of a later model to depreciate to their

affordable amount they are willing to pay. Automobile firms offer deals for used

or old cars which still accounts for a large part of their sales as a firm.

Prices vary in the market for the automobile industry as a result of product differentiation

and different cost structures. Larger firms may use the following price strategies listed above to

gain advantage in this competitive market. Automobile manufacturers have not seen to use limit

pricing as a way to keep potential entrants out.

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2. Product Strategies

When evaluating product strategies we look at product design, product features and

benefits , product quality, product branding, product target market. The automobile industry

offers a variety of product designs to sell to as many people that they can. There are many

different types of car styles these include coupes, sedans, trucks, suv’s, vans, wagons, sports

cars, convertibles, hybrid cars, luxury cars, crossovers, and electric vehicles (NADA). With such

a wide variety of product designs the automobile industry is able to meet the demands of a wide

consumer audience. Every big manufacturing firm offers most of these different product designs.

Product features and benefits are what a manufacturer adds to the product that may

increase the benefit offered to the target market. In order to determine the product features and

benefits you have to look at the bundle of benefits to the buyer. There are many benefits that

automobiles offer some of these are flexibility, and personal mobility and independence. Along

with the product features and benefits product quality is hard to define because each consumer

has a different definition of what quality products consist of. With each consumer having

different opinions of each car manufacturers products it is difficult to determine overall product

quality for any brand. The luxury brand of vehicles are seen as the most quality types of cars

because of the overall cost of these vehicles. Although not always true the more a car cost

generally means that it has more to offer to the consumer whether it be a car that can go faster or

a car that offers more luxuries it really depends on what a consumer is looking for in a vehicle

that determines the quality of the vehicle.

Product branding and target market go hand in hand for the almost every industry and the

same can be said about the automobile manufacturing industry. There are many different target

markets in the automobile manufacturing industry this can be seen in the wide variety of product

designs that are offered. Each product design is targeted to compete individually for a target

market and the product branding hat follows is used to compete against other manufacturers of

the same product design of which there are many.

Many car manufacturers seek to diversify the products that they offer. To do this car

manufacturers produce different brands under their company, other companies just exclusively

seek a high quality image. Manufacturers like Nissan and Toyota produce luxury cars that offer a

high quality image for their consumers under a different brand Nissan produces under the

Infinity brand and Toyota produces under the lexus brand. There are many more manufacturers

that do this. Then there are companies like Mercedes Benz, BMW, and Porsche that stick to just

producing high quality image automobiles. There are also manufacturers that produce to meet the

low cost demand of the market, these low cost cars are small economical cars that don’t have a

lot of features.

"Cars by Body Style, Category & Type." NADAguides. Web. 5 Dec. 2014.

<http://www.nadaguides.com/cars/body-styles>.

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3. Advertising

There are numerous social benefits and costs of advertising when considering firms

within an industry. Advertising is used to to convey information about price, location, or

quantity. In the automobile industry advertising is a key ingredient used by firms to distinguish

themselves as a prevalent company. From newspaper, tv commercials, billboards, to magazines

automobile manufacturers are seem almost everywhere to stimulate interest in their brand.

Advertising helps manufactures take on economies of scale in the distribution and production of

automotive manufacturing. But there are also a lot of social costs of advertising that come with

brand management.

Advertising Leaders of Industry(As of 2009):

*(Industrial Organization: Theory and Practice, 457)

1. General Motors - $2,215 Million

2. Ford - $1,517 Million

3. Toyota - $1,286 Million

4. Honda - $936 Million

5. Chrysler - $825 Million

6. Nissan - $691 Million

7. Hyundai - $402 Million

According to this chart the three biggest advertising firms in the market are GM, Ford, and

Toyota. As we saw earlier in the Market Structure these are the largest firms in the industry.

Although we cannot say that there is a direct correlation between amount of dollars spent on

advertising and market share; we can suggest that advertising does play a substantial role in

increasing the market share for firms within an industry.

The article, Auto Manufacturers, Dealers Put More Coordinated Ad Dollars to

Digital, shows the progression of advertising in the automobile manufacturing industry

and its expected continuous rise. The U.S. Auto

Industry is on track to become the second biggest

spender in paid online mobile media by 2015,

according to emarketer. Its digital ad spending is

expected to reach $7.8 Billion by 2017. As the

smartphone and tablet industry is rapidly

growing the growth of mobile ads has risen as

well. In 2002 newspapers were the biggest

endorser of ads in the U.S. but by 2011 it quickly

switched to television and internet. Automobile

manufacturers have abided by this change and

shifted their advertising investments to fit this

consumer demand. (emarketer)

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3. Research and Development

The automobile industry is the leading spenders in research and development that any

other industry. They spend approximately just over $100 billion dollars on R&D annually, which

is four times greater than the aerospace and defense industry put together. But how could the

automotive industry invest in more research than the aerospace and defense industries? It could

have to deal with there being an actual demand high consumer market. Car manufacturers need

to differentiate their product by increasing quality

and price by investing in research and

development. Research and Development in the

automobile manufacturing industry has three

main goals: lower cost of manufacturing, increase

car safety, and to build an attractive model. If a

firm was able to find a new cheaper material that

could be welded easily to construct the frame for

the car would certainly be at an advantage to

other firms since their cost structures would lessen. This industry has also seem increases in

educated workers with college degrees which has only enhanced R&D even further.

The Center for Automotive Research (CAR) defined a high tech industry with the

following principles:

● R&D expenditures > 3% of output

● Technical Employees(Engineers, technicians, scientists, mathematicians) make up

10% of workforce

● Continuous engagement in innovation of technical knowledge of production

The automotive manufacturing industry clearly abides by these principles and CAR labels it as a

leader in technological developments and applications. It could only be assumed that this

industry’s R&D is expected to grow exponentially over the years to keep up with the high

demand and competition within the industry.

4. Mergers

In the automotive industry mergers can be a useful tool for firms to benefit in the market.

Most mergers take place because a company believes the acquired company is worth more than

the acquired company believes they are worth. Mergers in the automobile industry are used to

improve market power, increase efficiency gains, reduce risk, build capital, and to rescue failing

firms.

Timeline of Automotive Industry Mergers:

1979 - Ford buys stake in Mazda

1998 - Volkswagen buys Bentley

1998 - Chrysler and Daimler Benz announce $38 billion merger

1999 - Ford buys Volvo

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2000 - GM buys Saab

2006 - GM and Ford have merger talks

2008 - GM and Chrysler hold merger talks

*(CBC News)

Mergers have been very prevalent in the automobile industry over the years as companies

with small stakes in the market concentration try to survive by merging with larger

conglomerates. If GM and Ford ended up merging after their initial talks in 2006 it would

completely reshape the automobile industry. It would mean that one firm would hold about a

35% share of the entire market. This firm would be the clear frontrunner in the market and could

expect to start to see almost monopolistic situations with the market.

_____________________________________________________________________________

V. Performance

Allocative Efficiency

In terms of performance the automotive industry is moving more towards allocative

efficiency. There are many people in the firms and the profits have been dropping in the

automotive industry to where price is starting to equal marginal cost. If we look at the table in

the cost structure section we see that the profit of the automotive industry in the year of 2014 is

only suppose to be 2.8%. This is almost at the zero profit level and is hinting toward an

allocative efficient level.

Production Efficiency

This industry is getting more productively efficient due to the technological advances in

manufacturing. What used to be man made and human assembled is now mostly robotic and

controlled which cuts down on flaws and creates consistency amongst the processes done and the

final deliverable. This has been an improving trend since the 1960s just because of the social

issues of polluting vehicles and the lack of safety standards in cars. All of this mixed together

with the concept of many output flaws like mentioned above and in the History article that there

were 24 cars with defects per unit of them sold which is a significant level of imperfections.

Quality and Service

This ties into quality and service as well because if the quality is good and consistent, the service

should be too. The rate of technological advance is moving at a fast pace to reach the next

greatest improvement in the automotive industry. The greatest quality and service for automotive

makers is to meet the regulations imposed on them to make more fuel efficient vehicles. This

will come to the production of electric vehicles(IBISWorld) because you will now have a motor

that requires far less maintenance, no fuel, and will cost relatively the same as a gasoline

powered motor. although in the past like the 1930s to the 1950s the technology of cars stayed the

same for nearly 3 decades. Being able to deliver a car that has more power, better gas mileage,

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burns cleaner, appeals to the consumer, and to lower profit margins in order to do so

demonstrates quality and service.

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VI. Conclusion

The automobile industry has been one of the largest global markets of the last 50 years.

Its leading investment in R&D are what shape its progressing future. With new firms that have

taken on different features such as electric powered, impressive add-ons, improved safety

features, and high speed performance cars keep his industry as a competitive and high gross

industry. Consumers have been impressed with these improvements of the next generation

models and eagerly look on to set whats ahead. The fuel efficient cars and improved safety

features (blind spot protection, rear view camera, etc.) have cohered with society's interest in

improving its social welfare. Reduced car emissions and accidents have shown the progression

that this industry in a positive way. The firms such as Coda Automotive and Wheego Electric

Cars have shown that new firms can enter the industry and succeed. I would recommend entry to

potential entrants as long as they have enough infrastructure and capital to compete with these

large firms. This industry has shown to be successful for past entrants and I could see more firms

entering the market in the near future that are powered from a source of renewable energy. The

big firms like GM and Ford are still depending on the consumer demand for oil, but as prices rise

new alternative sources of energy will be looked to. I would assume that GM and Ford would

shift their agendas to renewable sources if this came to be the case, but the companies that invest

first clearly will be at the advantage with lower cost structures and advanced R&D in this field.

This is a progressing industry and I would recommend consumers to invest in such an elite

market. Hyundai-Kia Automotive Group since according to IBISWorld it is expected to gain

market share and in the next 5 years. It has seen an increase in revenue in the last four years as

well and seems like a stable progressing firm in the automotive industry.

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VII. Citation

1) Automobile Manufacturers Association. Automobiles of America, 2nd ed. 1968. Detroit:

Wayne State University Press.

2) May, Geoge S., Ed. The Automobile industry, 1896-1920. 1990. New York: Facts on File.

3) May, Geoge S., Ed. The Automobile industry, 1920-1980. 1989. New York: Facts on File.

4) Peterson, Joyce Shaw. American automobile workers, 1900-1933. 1987. Albany: SUNY

Press.

5) Ramsey, Mike. "Tesla Expected to Announce Automated-Driving Features Thursday."

Business. 6 Oct. 2014. The Wall Street Journal. Web. 9 Oct. 2014.

<http://blogs.wsj.com/corporate-intelligence/2014/10/06/tesla-expecte<http://blo

s.wsj.com/corporate-intelligence/2014/10/06/tesla-expected-to-announce-automa

ed-driving-features-thursday/?KEYWORDS=automotive>.

6) White, J. (2013, April 16). “Changing Gears: Auto Makers Ditch Familiar Shift Levers.”

The Wall Street Journal. 16 April 2013. October 8, 2014.

http://online.wsj.com/news/articles/SB1000142412788732434580457842665400

901588?mg=reno64-wsj>.

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