External Analysis of Automotive Industry

Topics: Automotive industry, Renault, Opel Pages: 7 (2053 words) Published: February 17, 2014

External Analysis of The Automobile Industry

The automobile industry is an extremely large and complex industry that is made up of many different businesses that all share a part in the manufacturing, sale, service and financing of automobiles. This industry makes up a large part of the United States economy as well as the world economy, and therefore is important to understand. To understand the automotive industry it is best to look at the industry, market, and competition that shapes it.

The automotive industry is a business sector that produces and sells automobiles to a number of different outlets. The categories of automobiles that the automotive industry produces are sedans, minivans, SUV’s, light trucks, and pick up trucks. The automotive industry is tied to many other industries. These industries produce products used in the automotive industry as well as products that are very similar to the ones that the automotive industry produces. Examples of similar industries include but are not limited to truck and bus manufacturing as well as the trailer and motor home manufacturing industry. Other similar industries include those that produce the pieces and parts necessary to manufacture and maintain the automobiles that the automotive industry produces. For example, industries such as metal production, rubber, textile, plastics, glass, and petroleum are all necessary to the production of automobiles and therefore are related industries.

The automotive industry is one of the largest industries in the world according to sales revenues, and its well-being is extremely dependent on the economy. This became apparent when the economy took a large downturn and the automakers suffered greatly. The automotive industry makes up a large and important part of the U.S. and world economy with total sales revenues of over two trillion dollars annually (First Research, 2012). As mentioned earlier the health of the automotive industry and a healthy economy are tied very closely together. The recession that occurred in 2008 demonstrates this with car and truck sales decreasing from 16.1 million units in 2007 to 13.2 million units in 2008. As the recession continued to affect the amount of disposable income that the American population had available to spend on automobiles, the number of automobiles sold in the U.S. in 2009 decreased even further to 10.4 million units. To put this massive loss of sales during the recession in perspective, total sales of automobiles in units sold decreased by over thirty percent. This massive loss of sales contributed to General Motors and Chrysler both declaring bankruptcy in 2009 (Plunkett Research, 2012).

The automotive industry is a mature one in that it is over 100 years old and is a vitally important part of the economy here in the United States as well as the larger world economy. Another reason that the automotive industry is classified as a mature industry is the presence of a stable base of manufacturing companies that remains fairly consistent in its numbers coupled with long established processes for production (IBIS World, 2013). Current trends factor greatly into how a mature industry such as the automotive industry operates and what it produces. Understanding current societal trends and responding to these trends is an absolutely essential part of the automotive industry. Companies such as Ford and General Motors are constantly working to create automobiles that address trends such as getting better gas mileage, emitting less harmful emissions, and having automobiles that are practically priced and available to a large majority of consumers. Other trends that members of the automotive industry must address include automobile size, market penetration, decline of Japanese manufacturers, and the current trend of automobile companies merging. Automakers have begun to merge and work together in order to capitalize on specific strengths possessed by certain automakers. The...

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