Car manufacturing industries specialize in the production, wholesale and retail sales of cars. As an integral component of the economy, they play a key role.
Revenue in the Car and Automobile Manufacturing industry should rebound during the five years to 2022 as demand increases due to COVID-19 pandemic and macroeconomic conditions improve, propelling its recovery. Pent-up demand will lead to its revival as will improved macroeconomic industry conditions that favor growth.
Porter’s Five Forces Model
The Five Forces Model is an effective strategy tool that can assist managers in their industry context and better comprehend external factors influencing a business, helping determine whether its growth can be sustainable.
Toyota must contend with an array of competitors in the auto industry to remain successful, which include automakers producing models to meet consumer expectations and preferences as well as fierce rivalries for advertising dollars and market share.
Suppliers in the car manufacturing industry enjoy low bargaining power because they supply components that go into constructing cars that are readily available. Furthermore, this supply doesn’t require much capital or labor input.
Buyer power in the car manufacturing industry is relatively high due to an abundance of individual customers or organizations purchasing fleets of vehicles. If they find a cheaper product elsewhere, these customers have access to switch easily between manufacturers.
Pestle Analysis
PESTLE analysis is an invaluable way for companies to assess external factors that impact their business, such as political, economic, social, technological, and environmental influences. Conducting regular PESTLE analyses should form part of strategic planning processes and should not be neglected.
Businesses often utilize this analysis to understand their current state and develop strategies. Furthermore, this approach allows businesses to identify strengths and weaknesses. When conducting this examination of all aspects of a company it is vital that all relevant aspects are included as factors are taken into consideration.
Analysis is an invaluable way to identify factors affecting the automotive industry and devise strategies to overcome them and remain competitive in their markets. Furthermore, understanding future trends of an industry allows business to make informed decisions and plan for its future – so be sure to perform this analysis every few years as part of your strategic planning process.
Global Recession
Supply chain issues, high interest rates and inflation have resulted in car buyers being less willing to shell out money for new vehicles this year despite production levels rebounding; it seems unlikely that sales will return to pre-pandemic levels this year.
Legacy brands will find it challenging to compete with Tesla and other new entrants into the global mobility marketplace, given the cost associated with developing an ICE car and needing massive facilities such as presses, paint shops and assembly lines to produce 150,000-200,000 cars annually. Such requirements act as a significant barrier of entry.
Recessions don’t typically lead to significant drops in used car prices; however, that could change with micromobility and ride hailing taking hold. Old carmakers might lose market share to these newcomers, further worsening their financial situations as auto workers become unemployed; meanwhile a slow economy could put pressure on global central banks to tighten monetary policy even more tightly.
COVID-19
The COVID-19 pandemic has had a devastating effect on car production and sales, particularly electric car sales in April – which fell by half in both the United States and Germany and 90 percent in India. As a result, industry profitability is struggling while many governments impose new regulations to limit vehicle traffic.
Research focused on the challenges and risks that a company must confront during the COVID-19 crisis, such as shortage of raw materials/spare parts, disruption in delivery service, an increase in demand fluctuations, lack of transportation availability, new work rules/regulations/social distance restrictions.
It also contains recommendations and best practices to help the company survive the crisis, with recommendations tailored specifically for this automotive manufacturing company. The framework proposed can also be applied to other automotive manufacturing firms looking to become sustainable 4.0. Using the sense-adapt-transform model, this study used COVID-19 as an impactful case study company used its operational activities during an examination period to better understand its effect on its operations; results of which revealed a need to upgrade supply chain structures by creating regional structures while increasing safety stocks so as to avoid shortages during crisis periods.
