Automotive Industry Analysis

The automotive industry is involved with the design, development, manufacture, marketing and sale of motor vehicles. According to the International Organization of the Construction of Automobiles, more than 77 million motor vehicles were produced worldwide in 2010 (2011, March 22). Also, 57.29 million cars were sold worldwide (North America - 13.93 million, Western Europe - 12.96 million, Eastern Europe - 3.61 million, Asia - 22.47 million and South America - 4.27 million) (Gomez, C. 2011, March 29). The markets in North America dropped because of the economy and rising gas process, where as the markets in Western Europe, Asia and South America continued to rise.

In 2008, when the oil prices began to rise at an alarming rate, the automotive industry started experiencing a combination of pricing pressures from raw material costs and changes in consumer buying habits. The industry also faced external competition from public transportation as consumers are re-evaluating their personal vehicle usage due to the cost of gas.

The United States is the world's largest consumer market for light vehicles, passenger cars and light trucks. This auto industry is dominated by the Big Three, known as General Motors, Ford Motor Company and Daimler/Chrysler. These three account for roughly a little over half the production of cars and light trucks in the industry. In recent years, the Big Three lost the market share to its foreign counterparts, in fact, only two American vehicles were included in the top ten picks of 2010, Chevrolet's Traverse and Silverado. The remaining eight vehicles were made by the foreign automobile industry.

With the American automotive industry being a large producer of sport utility vehicles, sales had drastically decreased due to a lack of fuel economy on these vehicles. The rise in fuel prices has played a significant role in the development of both hybrid and more fuel-efficient vehicles. Because of the rising gas prices and the downshift of the economy, recovery of sales will gradually increase in the next three years. The key variables on the growth of sales for the American automobile industry are the economic recovery, manufacture's term of pricing and incentives, the availability of credit and buyer level of confidence.

The main target for the American automobile industry for many years was the baby boomers generation. Now that times have changes and this generation is beginning to retire and not spend as much money, automobile manufacturers are beginning to look at the younger, more environmentally cautious generation. This generation ranges in age of mid 20's to 30's and will account for at least thirty percent of all vehicle sales. This generation prefers vehicles that are more fuel-efficient but have a modern look. Even though this generation is younger, they are financially savvy and will look for manufacturer's rebates and will do most of their shopping over the Internet instead of going to a dealership to start the sales process.

Manufacturers understand in this day and age that the internet plays an increasingly important role in the vehicle shopping process. According to JD Power and Associates, "more than 79% of new vehicle buyers using the internet during the shopping process. 24% of buyers submitted an online request for a quote to a dealer and were on average more satisfied with the negotiation and the price paid" (2010, November 17); however, the same buyers were not satisfied with the sales process if they did not submit an online request and just went straight to the dealership. The sales and negotiation process is much longer and the cost of the vehicles were higher than quoted on the Internet. The current generation prefers a smoother, more straightforward process and understands if the manufacture rebates and the sales prices are not to their expectations, they can always go to the competitors (usually the foreign market) and purchase a vehicle from one of their dealerships.

The foreign automobile industry has dominated the sales of new vehicles in the United States for a number of years because of the quality of their vehicles, their vast choices for hybrid and fuel-efficient cars and for the most part, a better financing structure for consumers. Auto manufacturers require