Production volumes in automobile companies have grown by around 2% per year over the last 20 years;
however, its relative importance in terms of market value compared to other industry sectors has decreased significantly.
Today the automobile industry represents less than 2% of the total European market capitalisation, while 20 years ago
the sector was almost double in relative size.
Only about 1/4 of over 50 car manufacturers who were operating 40 years ago have been able to retain their
economic independence.1 Despite this consolidation, overcapacity in the industry is a constant issue, keeping pricing
and the return on invested capital under pressure when the cost of capital can often not be covered. A high fixed cost
base ensures that companies follow a growth strategy. However, this does not mean more jobs in the sector, but rather
that fewer employees in lower-cost countries have to produce more.
As a result of tough competition, product cycles have become shorter which creates a crowded market place with
newer and fresher products. This also means that 1) the competitive advantage period of a model, or technology,
decreases, and 2) research & development costs have to be covered more quickly.
Recognising market movements first, or even creating them, is a key success factor for automobile companies. For
example, early detection of the rising demand for hybrids was an important marketing move for Toyota, while other
companies may be launching their hybrids when competition is already quite intense.
The industry is mature, especially in the European and American markets, while some Asian markets (e.g. China and
India) still offer some growth. Overall, demand growth is likely to stay below the nominal GDP (Gross Domestic Product)
In all consumer markets, whether they are low-priced household goods, food, apparel, or cars, a clear polarisation
exists. On one side there are people who can afford to buy very expensive automobiles, while on the other, demand for