Automotive Manufacturing Industry

Project One: Executive Summary
Christopher Fuentes
Southern New Hampshire University
BUS 225: Critical Business Skills for Success
Harold Graham
March 18, 2023
Project One: Executive Summary
Problem
Any business must diversify to increase its revenue streams, mitigate risks and increase its market share in other industries (Syuzeva & Zheltenkov, 2021). In the case of this company, diversifying will solve the following problems. Firstly, the company will mitigate the risks of relying on only one revenue source. In this case, the business relies on building engines for other companies in the automotive industry. The business will be forced to close down if the industry faces economic challenges like low consumer demand. Diversification will ensure the business minimizes dependence on the automotive industry and speeds risks to more industries. Secondly, the business is only in one market. Through diversification, it will improve its share in other markets and hence increase its revenue. The business will need both qualitative and quantitative data. Qualitative data will include the consumers' tastes and preferences and the client's needs. Quantitative data will include the market size, competition, and sales projection.
Automotive Manufacturing Industry
According to IBISWorld (2022), the market size of the car and automobile industry in the US, measured by revenue of the industry, is $104.1bn in 2022. The market size is projected to increase by 3.3% in 2023. Regarding regional sales, the Western and Southern regions of the US have the highest sales. They are followed closely by the Northeast and Western regions. Sales by fuel and motor type hybrid, plug-in hybrid, and electric vehicle sales have increased as the sales of non-hybrid internal combustion engine (ICE) vehicles using gasoline or diesel reduced. For instance, in the fourth quarter of 2021, the sales of hybrid, plug-in hybrid, and electric vehicles accounted for 11% of light-duty sales in the US. While the manufacture of non-hybrid ICE vehicle types increased by 49%, the 26 for hybrid and electric vehicle models saw an increase of 126% (US Energy Information Administration, 2022). Concerning body types, sports utility vehicles (SUVs) and trucks are the most popular. For instance, light trucks (Pickup trucks and SUVs) had 922,023 sales, while passenger cars made 239,370 sales in the same year (Marklines Data Center, 2023). Moreover, the automobile industry in the US is popular. As of 2022, 76% of Americans reported having access to a car (Statista, 2023). The extensive road network coverage is an incentive for motorization
Several trends have emerged in the automobile industry. One of the trends is the shift towards electric and hybrid vehicles. The advances in battery technology have allowed manufacturers to concentrate on manufacturing electric and hybrid vehicles. Consumers have become more aware of the need to protect the environment against pollution, and electric and hybrid vehicles have provided the solution (Yeğin & Ikram, 2022). Another trend is the increasing demand for SUVs and trucks. These vehicles provide the space that consumers want. Consumer demands have also changed regarding cost, technology, and safety. Consumers want cost-effective vehicles that consume less fuel. The vehicles should be advanced in technology, utilizing more advanced features. For instance, the perception that Tesla has superior technology, like self-driving capabilities, has attracted clients to purchase them (Nastjuk, 2020). At the same time, consumers want vehicles that assure them of safety.
New Industry
The automotive manufacturing industry is an important sector in the US economy. In 2021, the industry generated about $2.86 trillion in revenue (Statista, 2023). The significant markets included the US, China, Japan, Germany, and South Korea. The automotive manufacturing industry is expected to grow as vehicle demand increases. Factors like urbanization and emerging new markets in the developing world will drive growth. In particular, the demand for electric and hybrid vehicles will increase as people desire clean energy sources. The industry remains competitive, with significant players eyeing the lucrative market. The main competitors include Volkswagen Group (Germany), Toyota Motor (Japan), Mercedes Benz Group (Germany), Ford Motor (US), BMW Group (Germany), General Motors (US), Honda Motor (Japan), and Tesla Inc. (US). In 2022, Volkswagen Group had the highest revenue of $295.73 billion, while Toyota Motor came second with $281.75 billion (Carlier, 2022). Tesla is the leading manufacturer of electric vehicles (EVs). As EV demand grows, more players will likely enter the EV market.
Several market trends are affecting the automotive manufacturing industry. Firstly, there is a gradual shift towards EVs. People have become aware of the dangers climate change poses to the globe. Human activities like burning fossil fuels have contributed immensely to global warming (Berlie, 2018). More people want to own EVs so that they can participate in combating climate change. Secondly, the market for autonomous vehicles is expanding as people seek technologically advanced vehicles. Autonomous vehicles operate without a driver and have gained attention in the past few years. These vehicles will reduce road accidents and make mobility easier for individuals who cannot drive. Lastly, there has been a shift toward increasing demand for SUVs. These vehicles are more spacious than traditional cars, providing value for money.
Porter’s Five Forces Analysis of the New and Automotive Industry

New Industry

Automotive Manufacturing Industry

Rivalry among existing competitors

The top three competitors are General Motors, Toyota Motors, and Ford Motor Company, with a market share of 17.09%, 15.1%, and 13.9% (Carlier, 2022). The competition is intense in the automobile manufacturing industry. The various manufacturers engage in rivalry, like reducing the price of their products to increase market share. At the same time, the companies are engaged in constant innovation to come up with products that outdo their competitors. For instance, developing vehicles with improved fuel efficiency and enhanced driving experience has been critical in attracting clients.

According to IBISWorld (2023), 561 automobile engine & parts manufacturing businesses are in the US. The automotive engine market is highly fragmented, with numerous players. According to MordorIntelligence (2023), Cummins Inc., Toyota Motor Corporation, Fiat Automobiles SpA, Volkswagen AG, MAN Energy Solutions, and General Motors are the most prominent players. The competition among these businesses is intense, which forces them to lower prices to gain more market share. The companies are also engaged in research and development, especially on fuel efficiency, to ensure their products are superior in the engine market.

Threats of new entrants to the market

One of the barriers to entering the market is the highly intense competition from the already established players. New entrants have to offer superior products, which are also cost-effective, which makes it challenging for new entrants to achieve significant success. Secondly, the industry is capital-intensive. The high capital requirements to establish manufacturing plants discourage new entrants without a huge capital base (Pedram, 2015). Thirdly, the regulatory requirements are complex. New players must navigate the complex system. Meeting these regulations can be costly, making it challenging for new players to join the industry.

Manufacturing and supplying engines is very expensive for new entrants without a huge capital base. The business can be expensive for businesses starting since they have to invest in the establishment of manufacturing plants. Joinin...