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What Is Automotive Industry Analysis?

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  • Written By: Esther Ejim
  • Edited By: Kaci Lane Hindman
  • Last Modified Date: 29 June 2014
  • Copyright Protected:
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An automotive industry analysis is a detailed study of the automotive industry with a view to finding out the various factors that shape the industry. The purpose for conducting an automotive industry analysis depends on who is conducting it. Prospective investors could decide to conduct an automotive industry analysis in order to find out if it is a worthwhile investment. Already existing automotive companies could also conduct such an analysis as part of their ongoing assessment of the marketplace and strategic positioning. Even scholars, economists and government can study the various factors inherent in the automotive industry as part of a general study of the industries in an economy.

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One of the aspects studied during an automotive industry analysis is the ease with which new investors can penetrate the market. This factor is important due to the fact that the easier it is for new entrants to set up factories related to the automotive industry, the more crowded the market will become. In the case of the automotive industry, it takes a lot of capital and resources to set up a car manufacturing company, meaning that this requirement narrows down the field to only those two have the financial wherewithal to invest in such a heavily capital intensive industry. To this end, there are only a few major players in the automotive industry, and most of them have subsidiaries in various countries around the world. Some of them even have investments in some of the smaller automobile companies, leading to a sort of interconnectedness and among the big companies and the little ones.

Another consideration in an automotive industry analysis would be the power wielded by the customers of such automobile producers. The dynamics of the relationship between the producers and the buyers is vital, because where one party has too much power it will be able to dictate the terms of the relationship to the other party. In the case of the automobile industry, most consumers usually look to other sources of purchasing automobiles when the local producers do not offer them what they require. This is the reason why there is usually a mixture of automobile types in any country, not just the product of that country if it is known for automobile production. The disenchantment could be as a result of price, or it could be due to the desire of the consumers to try other designs and other products.

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