Project One: Executive Summary
Problem:
The United States automotive industry suffers from a severe lack of environmentally friendly vehicle options that can a): reduce emissions and b): travel in a fuel-efficient way (Garsten, E, 2021). This is a major issue as our society finds itself at cross-roads between fossil fuels and clean energy; diversifying into the Hybrid & Electric Manufacturing Industry not only innovates our existing offers; but also gives new, and more sustainable options to an ever-growing environmentally conscious consumer base (Martins, A, 2024). In order to support our diversification strategy, I will be using both quantitative and qualitative data. Quantitative data such as gas milage, energy usage, revenue and vehicle production cost will be the primary contribution to this presentation. But qualitative data, like consumer feedback, and preferences will also play a significant role in our diversification strategy, especially as consumer behavior is greatly impacted by strong consumer service and satisfaction policies.
Automotive Manufacturing Industry:
The United States automotive industry saw "low consumer confidence and low business sentiment" (IBIS World, 2024) during the COVID-19 pandemic that discouraged consumer behavior, reducing the automotive revenue by -13.6% in 2020 (IBIS World, 2024). Later seeing revenue growth of 6.9% in 2022, stagnating out at less than 1% growth in 2023 and 2024, expected to see further stagnation in coming years. Currently value of the industry, as measured through over-all revenue is $41.5bn (IBIS World, 2024). There are three large "automotive hubs" in the United States; the biggest of which is located in the Great Lakes region, most notably the state of Michigan. The Great Lakes region amounting to 25.99% of establishments, holds many of the largest U.S automotive manufacturers including the General Motors Company (GM and Ford Motor Company (Ford). The second largest-hub is the Southeast U.S amounting to 23.07% of automotive manufacturers. Lastly the third major hub is the Western states, amounting to 17.2% of all establishments. Alternative and environmentally-friendly vehicles have steadily grown in demand, reaching 13.80 million electric cars in 2023 (Our World in Data, 2024). Additionally, U.S car demand varies dramatically depending on segment or model, with Crossover holding the largest share of 45.1% in Jun, 2022. Pickups at 19.3% and small cars at 7.1% (Carlier M, Statista, 2022).
Purchasing trends in the U.S automotive industry has been towards Crossover's, Pickups and small Cars. New Gasoline engines make up 59.9% of new car sales or $24.9bn in revenue, while automotive parts make up 29.1% of revenue for the industry or $12.1bn. Numerous auto-parts like pistons make up 7.6% or $3.2bn while rebuilt gasoline engines make up 3.4% or $1.4bn (IBS World, 2024). Hybrid and Electric vehicles have seen a "booming rise" in sales in 2024; with Hybrids growing by 50% in sales during the first two months of 2024 alone (Carter, T, 2024).
New Industry:
Major products of the Hybrid & Electric Manufacturing industry are very similar to that of the classic Automotive industry in the United States. The industry saw 36.2 % growth from 2019 to 2024, and is expected to see 9.7% growth from 2024 to 2029 (IBS World 2, 2024), signaling huge potential for further growth. As consumers become more and more environmentally-conscious, it is expected that'll influence the market leading to further growth. With 269 establishments, the main competitors are Tesla, Inc, with 34.1% market share, Ford Motor Company with 5.4% market share. Additionally, Honda, Toyota and General Motors have also entered the industry with smaller shares of the overall market (IBS World 2, 2024).
Revenue totaling $122.1bn, 55.8% is in Hybrid-Electric vehicles, while $39.2bn or 32.1% is in Electric vehicles, additionally $14.8bn or 12.1% is in Plug-in Electric vehicles (IBS World 2, 2024). Totaling 269 establishments, the Hybrid & Electric Vehicle industry is rapidly expanding, with three major manufacturing hubs. The largest of which is the Great Lakes sector, with 33.6% of establishing, coming in second is the Western states with 25.5%. Coming in a close third is the Southeast with 24.1% of establishments.
With today's consumer-base becoming more conscious and discerning in their purchasing behavior (ONIO, 2024). it is more important than ever for our industry to monopolize and be reactive. Expanding into the Hybrid & Electric Vehicle industry is promising, both in terms of growth and attracting new, more environmentally-conscious consumers.
Almost 14 million new electric vehicles were registered in 2023(IEA, 2024); of those, the Plug-in Hybrid Vehicles (PHEV) have grown significantly as a market percentage(IBS World 2, 2024). Indicating that consumer-demand has increased in recent years; and is very likely to increase even more. Public and private charging ports have trended positively in recent years; seeing an increase of 7.7% in Quarter 3 of 2023 and 4.6% in Quarter 1 of 2024 (Alternative Fuels Data Center).
Porter’s Five Forces Analysis of the New and Automotive Industry:
|
|
New Industry |
Automotive
Manufacturing Industry |
|
Rivalry
Among Existing Competitors |
Conducting
an analysis using Porter's Five Forces; we can determine that the market of
Hybrid & Electric Vehicle manufacturing is very promising. Although the
market is highly competitive with four strongly-established companies that
hold 47.4% of the entre market share in 2024 (IBS World 2, 2024). The largest
market holder is Tesla, Inc, which has recently lost it's majority share of
the market, falling under 50% (Energy News US, 2024). While the other major
competitors of General Motors, Ford, Hyundai and Kia have gained market
share. |
There
is a high-level of competitiveness in our current market; there are dozens of
larger-companies that supply gas-powered automotive engines and parts; which
has increased the options and competitiveness of the market. Additionally
services like complimentary road-side assistance or wireless startup has been
one of the main areas of competition to attract new consumers. |
|
Threats
of New Entrants |
The
"Threat of New Entrants" is low; given that the barriers to entry
for the market are High, due to numerous reasons. Most notably is the legal
and regulatory requirements faced by automotive makers in the Hybrid &
Electric market, including regulations involving fuel efficiency and vehicle
safety (IBS World 2, 2024). Additionally new start-ups face significant
hurdles due to the number of already-established automotive companies in the
market, leading to reduced cash-flow for startups and lack of funding
opportunities. |
There
are high barriers to entry for new companies and startups due to the same
legal and financial factors presented in the Hybrid & Electric Vehicle
Manufacturing market. |
|
Bargaining
Power of Suppliers |
The
bargaining power of suppliers is low; due to the wide-availability of
automotive parts and the ease of gaining access due to the larger automotive
industry here in the United States. Additionally, the large international
market for automotive industry allows companies to leverage the market for
better prices (IBS World 2, 2024). |
The
bargaining power of suppliers in the automotive manufacturing industry is
moderate because of the wide-range of available suppliers and the globalized
market offering alternatives for manufacturers to choose from. Although
recent supply-chain disruptions like the Russian Invasion of Ukraine or the
COVID-19 pandemic have affected the steel supply, leading to increased
bargaining power for suppliers (IBS World, 2024). |
|
Threat
of Substitute Products |
The
Hybrid & Electric Vehicle Manufacturing market has a moderate threat of
substitute products. Natural-gas cars are similar to hybrid and electric
vehicles, and still have significant popularity and market share, which is
the biggest substitution threat to this market. But given we are already in
the automotive market, this shouldn't pose a big risk to our operations. |
There
is a high threat of substitutions due to the number of companies present in
the automotive industry, giving consumers many options to choose from to find
the best-price possible. Additionally; similar products like motorcycle,
public transportation and electric vehicles have been a big risk to the
market, causing the popularity of gas-powered automobiles to drop. |
|
Bargaining
Power of Buyers |
The
bargaining power of buyers is high in this market; given the
rapidly-increasing popularity of the market; there are numerous options for
buyers to purchase from which gives them options to attain the best prices
possible. Additionally; due to the threat of substitutions in the regular
automotive industry, it gives even greater bargaining power to consumers. |
The
bargaining power of buyers is very high and continues to increase due to a
shift-towards environmentally-conscious thinking, leading to an increase in
popularity of Hybrid & Electric vehicles, along with other substitutions,
causing companies to sell their products for lower prices. |
Alternative
Fuels Data Center: Electric Vehicle Charging Infrastructure Trends. (n.d.).
Afdc.energy.gov.
https://afdc.energy.gov/fuels/electricity-infrastructure-trends
Carlier,
M. (2022, July 21). U.S. car market:
by vehicle type 2019 | Statista. Statista; Statista.
https://www.statista.com/statistics/276506/change-in-us-car-demand-by-vehicle-type/
Carter,
T. (2024, May 11). Hybrid sales are booming — here’s why drivers are buying
them over EVs. Business Insider; Insider.
https://www.businessinsider.com/hybrids-sales-booming-why-drivers-are-buying-them-over-evs-2024-5
Tesla
loses U.S. market dominance as EV makers catch up | Energy News Network. (2024,
July 10). Energy News Network; ENN.
https://energynews.us/newsletter/tesla-loses-u-s-market-dominance-as-ev-makers-catch-up/
Garsten,
E. (n.d.). Study Reveals Automakers Not Using Sustainability To Competitive
Advantage. Forbes.
https://www.forbes.com/sites/edgarsten/2021/04/13/study-reveals-automakers-not-using-sustainability-to-competitive-advantage/
IBIS
World. (2024). Automobile Engine & Parts Manufacturing in the US. Retrieved
from https://www.ibisworld.com/
IBIS
World 2. (2024). Hybrid & Electric Vehicle Manufacturing in the US.
Retrieved from
https://my.ibisworld.com/us/en/industry-specialized/OD4516/products-and-markets
IEA.
(2024). Trends in electric cars. IEA.
https://www.iea.org/reports/global-ev-outlook-2024/trends-in-electric-cars
Martins,
A. (2024, March 28). Most consumers want sustainable products and packaging.
Business News Daily.
https://www.businessnewsdaily.com/15087-consumers-want-sustainable-products.html
Number
of new cars sold, by type. (2024). Our World in Data.
https://ourworldindata.org/grapher/car-sales
ONiO.
(2024, February 15). The Rise of the
Eco-Conscious Consumer | ONiO. Www.onio.com.
https://www.onio.com/article/rise-of-eco-conscious-consumer.html
Soomo
Learning. (2020). Critical business
skills for success. https://www.webtexts.com
