Global Passenger Motor Vehicle Industry

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Global Passenger Motor Vehicle Industry


The global automotive industry develops, markets, plans and sells motor vehicle components and motor vehicles around the world. Approximately more than 70 million motor vehicles were produced world wide in the year 2008 which mainly comprises of commercial vehicles and cars.

The automobile market in 2007 showed a upward growth with sales of 71.9 million vehicles sold worldwide, out of which 22.9 were in Europe, 19.4 million in Canada and USA, 4.4 million in Latin America, 21.4 million in the Asia-Pacific region and 2.4 million in Middle East respectively. The markets in India, China, Brazil and Russia saw the most rapid growth. Japanese and the American markets were in the state of saturation during this period.

In 2007, there were 806 million cars and commercial vehicles on the road worldwide. Especially in India and China, these numbers are increasing at a faster pace. In the recent years, global passenger car industry are affected by unsustainablity, efficiency, poor service and affecting the health of the people. Due to these negative reasons, there are certain number of people who least like to buy a car in these years.

In the recent years, this industry is facing downturns because of reasons like rising oil prices, changes in the customer's buying attitude and increase in raw material costs. Due to these reasons, most of the major players in this industry are postponing their present plans and shutting down their low income plants worldwide. This inturn has caused roughly about 2 million job losses in this sector this decade.


The Global passenger motor vehicle industry is huge and has a very big growth potential in the near future. In this report , we confine our analysis to four well-established passenger motor vehicle companies in the world. They are DaimlerChrysler, Ford, General Motors and Volkswagen.

Daimler Chrysler seems to be standing first regards to its revenues and demand which has steadily been increasing over the recent years. It is also in the plans of expanding to the global markets in the years to come. Defending this good position, it has marked the books for its future success. Volkswagen, on the flip side has some tough years to come in the field of sales and revenues. Volkswagen's primary goal is to build its “people car” which is being prevented by other players who offer the similar quality substancially at lower prices. The negative aspects of age, size, aging workforces and old business, production and corporate structures will make Ford and General Motors to feel the pressure in achieving their goal in the next few years.

The other four Asian manufacturers with international markets are Hyundai, Honda, Nissan and Toyota. Of these four companies, Toyota is projected to be a excellent prospect in the future as it is relatively young and has the potential to create unique production and development practices, thus reducing the production cost and increasing the profitability of the company. Innovation in this field has brought Toyota a lead player in the hybrid passenger car manufacturer. Because of the quality and design of the manufacturing facilities available in Toyota, its brand image is recognized worldwide. On the other hand, Honda has showed steady and reliable growth in the passenger car industry. While Honda is not as advanced or trend-setting as Toyota, but it focuses its interest in new markets by creating innovative new products considering the environmental restrictions and demands. Honda will most likely reap profits than any of the big 3 (DaimlerChrysler, Ford and GM) companies in the future. The other two passenger car manufacturers, Nissan and Hyundai are not as stable as Toyota or Honda but promises to show a uptrend in the coming years. Nissan has suffered in the past relating to it revenues and sales, but with its new management, it has posted excellent improvements by implementing new strategies to move up to the next level. Hyundai Motor Company is also in the upswing by expanding its sales in the international markets. This allows Hyundai to take advantage of the new and emerging markets like India and other developing countries.

The other asian players, Maruthi Udyog and Shanghai Industrial Company are in a critical position of loosing their markets because of the fierce competition by the other large global companies which are entering these markets. These asian companies are particular about their approach in the respective countries. The recent economic meltdown in these countries could prove fatal for these companies in terms of sales and revenue. The trend in India will will stand for Maruthi Udyog company, because of the strong middle class population in this area. Maruthi is successful in this region because they focus on this population by producing fuel effiecient, quality and low cost cars for this market. Although it will take another five years to achieve their goal and stabilization if they continue their success. On the other hand. Chinese market will depend on how well the Shanghai Motor company‘s management is positioned to face the new opportunities, fluctuations in the emerging markets and changing customer demand.

Thus we confine our analysis to Daimler Chrysler, General Motors, Ford Motor Company and Volkswagen as major four passenger motor vehicle companies in the world.


Porter has indentified the five forces which influence the global passenger car industry.

They are :

(1) degree of rivalry;

(2) threat of substitutes;

(3) barriers to entry;

(4) buyer power and

(5) Supplier power.

Porter's framework is illustrated in Appendix A. Porter's five forces helps us in understanding the major forces which influences this segment of automobile industry.


Despite of the higher concentration of these four brands namely General Motors, Ford Motor Company, Daimler Chrysler and Volkswagen in United states denotes the lesser competition in the passenger car segment. These numbers do not tell the complete story about these manufacturers. Global automotive industry is no longer reaping grounds for these premium companies (GM, Ford and Daimler Chrysler)as there is a fierce competition in the global markets and in United States. This makes the premium companies to create innovative marketing strategies and plans of entering the global markets. The recent day trend in the automotive industry is distribution of competition and conglomeration of the mature markets. This trend is going to be remarkable in the years to come. This trend started long back in 1990s when American, European and Japanese companies initiated the mergers. Until 1989, Ford Motor Company had acquired some companies like Jaguar, Aston Martin, Land Rover and Volvo. Chrysler and Daimler-Benz Corporation merged in 1998. On the other hand, General Motors and Volkswagen have also taken over some smaller companies. Honda and Toyota , the Japanese car makers entered the United States in 1980's and fairly held their focus on the growing market share. The fierce competition and rivalry has been mainly because of the diversity, management strategies and the principles associated with them. The well established markets of United States and Western Europe showed a down turn in their market share. Now these companies should gather momentum and prevent the losses in these massive markets. The companies should turn their focus mainly in the developing countries of China and India as the growth potential is huge. Investing in these booming markets would inturn reap handsome rewards and recognition from the customers.

The companies like Ford and General Motors which are large production companies in terms of revenue are also some of the least profitable companies. This is mainly due to the lack of well-planned cost structures within their competitors. The high cost in these companies can be partly due to the inefficient production, distribution practices and the health care cost that they follow. Daimler Chrysler and Volkswagen on the other hand which does not posses any labor unions are benefited from the flexible cost structures by lowering the overall labor cost.

The huge size of GM and Ford Motor Company doesnot relate to the revenues of the respected companies. In 2004, GM and Ford lead the market in terms of production, roughly manufacturing about 15 million units and 8 million units respectively. But at the end 2004, Ford and GM ran lowest of operating margins in the industry. This sudden down turn is mainly due to poor management and partly due to the principles of older, well-established organization than younger and flexible foreign companies.

The large corporations pride and marketing success lie in the distribution of its different management brands. This trend is prevailing in the present markets where older brands have joined the central managements. For example, Dodge products are managed and marketed better by Chrysler Group in the U.S than the central management of Daimler Chrysler from Stuttgart. This comes to a conclusion that local management understands the customer and the brand as whole.