Analysis of the Automotive Industry |
Threat of New Entrants – LOW | Supplier Power - LOW | Buyer Power – MEDIUM | Threat of Substitutes - LOW | Competitive Rivalry – HIGH |
Capital Requirements * High upfront capital expenditure for designing and manufacturing. Cost Disadvantages * Car manufacturing has a long learning and experience curve, which results in higher defect costs.Product Differentiation * Established companies benefit from brand awareness/loyalty as a result of high expenditures in advertising * New entrants will incur high marketing/sales and distribution expenses to compete | * High number of suppliers selling undifferentiated materials to a limited number of buyers in the automotive industry | * Customers: Buyers have full access to information, are able to switch to different car brands, used cars, or alternative transportation method at a low cost. | * Substitutes: Busses, ...view middle of the document...
Product Differentiation * Established CV firms benefit from brand awareness/loyalty, as a result face less advertising expenditures | * Electric motor and battery can be sourced from numerous suppliers * Limited number of buyers who demand powertrains as there the EV industry is not as large as the CV | * Buyers have full access to information * Switching costs are highCustomers: * Have full access to information * Switching costs are higher when changing from a CV to an EV as the infrastructure to support users of CVs are highly developed | * Conventional cars pose a high threat as the support for using a CV is more developed than for an EV * Other substitutes include busses, subway/train, bicycle, airplane, walking which don’t offer the same convenience as a car | * Few number of competitors from the automotive industry compete in the EV industry * Exit costs are high for EV manufacturers |
Political | Economic | Social | Technology |
U.S. government support: * Direct tax subsidies for the purchase of an EV * Purchase rebates, free access to HOV lanes * Required to have a percentage of fleet sales that are zero-emission vehicles | * Average household owned 1.17 vehicles per driver * Automotive industry contributed to 3% of GDP, and employs 1.7 million people in the U.S. * Three largest car companies made up 49% of total market | | |
-direct tax sales-tax credit-dealership lobby-sell through dealership-california; rebates, HOV lanes-emission quotas | -rising oil prices-3% of american GDP - 1.7M employees-car expenses = 50% of household income-1.17 cars owned on avg | -green trend-strong reliance on cars-post-purchase anxiety-value conscious? | -innovation is important - becoming more fuel efficient, safety, range, and design |