3. Market Analysis
A. The European Industry Description
* Industry Size, Status and Growth
The automotive industry is a healthy and fundamental industry with a bright future. The EU’s automotive industry produces a third of the world’s passenger cars, producing 780 billion euros of turnover per year, with value added of over 140 billion euros. It imports far more than it exports with a total of 42.8 billion net profit of exports (2007). The EU’s car industry also provides 12.1 million of the total jobs in Europe. British car production is up 22% on the same period last year according to the Society for Motor Manufacturers and Traders. British car production is still revving ahead of the rest of the economy after official figures showed an increase in output for the 13th month in a row.
Eastern Europe, including Russia and Turkey, reported the fastest growth in car sales this year. The car industry grew to a record size in 2011, despite weathering a year that began with Japan’s earthquake and ended with a gathering sovereign debt crisis in the eurozone. Both IHS Automotive and LMC Automotive (formerly JD Power Automotive Forecasting) estimate that sales of cars and light trucks will have grown by about 4 per cent this year to 75m. Forecasters are predicting that car sales and production will grow further next year, but have trimmed their estimates because of worries about the impact Europe’s debt crisis will have on demand. EU exports of motor cars were €76 billion in 2010. * As demonstrated above, production is estimated to grow in the next year, therefore it is certain that there is demand for the cars we will be producing. * However, to be entirely confident in sales, we analysed barriers to entry of the automotive industry. Barriers to entry include: already established brands as a competitive threat. * Start-up capital- this issue is not relevant to Channell Cars as we have a sum of £500 million to invest into our business. * The automotive manufacturing facility is specialized and in the event of failure could not be easily retooled- this is a risk that our company have to take, as all car manufacturers do when entering the market. However, we will follow the lead of established brands such as Toyota’s strategic operations, in order to ensure we are manufacturing as efficiently as possible. This will ensure that productivity is kept at a high level. * Established companies such as Ford dominate a lot of the existing market share. However, rather than seeing this as a threat, Channell Cars see this as an opportunity to take inspiration from Ford’s established successful operations. Sales Patterns of the EU Car Industry:
Car sales in Europe have plunged to the lowest level since 1994, ultimately resulting in redundancies and production lines being shut down across the EU. Even best-selling brands such as Ford have suffered in the current economic crisis. However, car sales have grown by 6% during 2012, despite the economic state. There is slowly but surely a regenerated demand growing for the automotive industry which means there is a safe level of demand available for us to produce for.
* As you can see from this graph, although sales were declining in 2011, as the line reaches 2012, sales begin to increase again. Furthermore, the European Car Market is at the growth stage of maturity. According to the Franchise Business Economic Outlook 2011, automotive franchise establishments are expected to increase 3.9% from the previous year.
* PESTLE Analysis
When designing our two vehicles, Channell Cars took into consideration the current legislations in place within the car industry market. For example, legislations such as The National Highway Traffic Safety Administration need to be incorporated into the design of our cars. This links in with the design of our ‘City Car’, which is aimed at students and young professionals, who will...
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