The Automobile Industry: Challenges & Trends Ahead - Research Paper

Introduction

The international automobile industry is facing many challenges than ever before. From the manufacture of autonomous cars to the design and manufacture of electric-powered cars, global leaders are forced to modify their business models so that they can sustain their operations and retain their competitiveness (Bloomberg Intelligence 1). The manufacture of autonomous cars is likely to continue trending, especially in Europe because the market for diesel engines has declined. Operating profit for three major industry players namely Fiat Chrysler, General Motors and Ford declined by 11% in 2019 (Bloomberg Intelligence 1). The fall accounted for a shortfall of $2.8 billion compared to the first quarter in 2018. The industry expects erosion of the operating profit of the leading manufacturers due to competition and the development of autonomous technologies. Global manufacturers are spending a significant percentage of their budgets on research and development, aiming to develop new designs and apply new technologies to reduce the cost of production. For example, Tesla's research and development spent 7% of the total budgets and this is the lowest in the industry (Bloomberg Intelligence 3). It implies that the industry is changing is facing serious challenges that require the application of new business models so that the companies remain profitable.

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Research Aim

The investigation aims to assess the global automobile industry with specific reference to Toyota and General Motors as the primary competitor. Furthermore, the paper seeks to unfold how the two companies sustain their competitive advantage in China and the United States. Also, the investigation will look at how the companies apply competitive strategies in the two regions. Consequently, the report is essential for decision-making since it will provide critical information regarding the industry and how to gain a competitive advantage.

Description of the Competitors

2019 was a good year for Toyota Company in the United States, especially in North America. The company reported selling 207,373 vehicles in North America alone in December 2019. Although there was a decline from the same period in the previous year, the company performed better than the competitors. In general, the company's sales in North America were 2,383,349 (Toyota 1). The sales recorded a 1.8% decline from the previous year but the company retained its first position in hybrid, passenger cars, and SUV. Other brands it retained its first position include small trucks and retail sales. Figure 2 summarises the sales of the company in the United States (Toyota 1). In general, the company's global sales rose by 2.7%, selling 2.71 million units with Asia and North America, recording a significant increase in sales. In the Chinese market, the company sold 1.47 million units in 2018, demonstrating an increase of 14% from the previous year (Tajitsu 2). The automobile industry in China contracted because of the purchase tax that made it expensive to buy personal or smaller cars and this discouraged many people from buying Toyota's cars.

Figure 2: Toyota Motor North America reports

Although the United States is the most vital market for General Motors, it sold more units in China than in the US in the 2019 financial year. The company sold 3,094,000 units in China while it sold 2,887,000 units in the United States. It sold 476,000 units in Brazil. Figure 1 illustrates the company's sales in different markets (Statista 1). The information shows that the company is doing well in different regions regardless of the competition from other companies, such as Tesla. In China, General Motors faces stiff competition from companies, such as Detroit and its associates that sold more than 3 million vehicles to Chinese customers (Statista 1). On the other hand, General Motors sold about 7.7 million units internationally but about 6 million of the customers came from China and the United States. The data shows that competition in the industry is intensifying in the two markets; hence, the need to develop the market to diversify sources of income.

Figure 1: General Motors Company sales

Source: Statista 1)

Competitors, Vision and Mission Statements

Although Toyota and General Motors have significant market shares in China, other brands are leading the market. In 2018, Toyota had a market share of 4.5% in the Chinese automobile industry (Sano & Inoue, 1). In the United States, Toyota had a market share of 17% in 2018 and this illustrates that the company is doing well in the two regions. The primary competitors of the company in the Chinese market include Volkswagen and Honda. In the United States, the leading competitors include Fiat Chrysler Automobiles, Honda, Volkswagen, and Subaru. It shows that the market is expanding, but the competition is also intensifying. Therefore, companies should develop exceptional long-term strategies to sustain their success.

The mission statement of Toyota is to make vehicles popular among the customers while the vision is to lead the future of mobility and enrich traveling people (Toyota 1). The mission statement of General Motors is inspiring customers through brands with the application of groundbreaking technologies while the vision is to create a sustainable future with zero crashes. Based on the vision and mission statements, the companies apply various strategies in different regions, aiming to lead the market. Worth noting is that companies develop strategic management techniques based on short and long-term targets.

Competitive Strategies

Toyota has succeeded in various markets because of the unique strategies it applies that focus on meeting customer expectations. For example, in the US market, the company manufactures hybrid vehicles that are fuel-efficient; thus attracting the market demand (Toyota 1). For a company to be successful in the global automobile industry, it must apply differentiation techniques to attract and retain customers. All cars in the US market must meet emission tests failure to which they will not be allowed in the market. Therefore, the company has invested in new technologies to reduce the emission, as well as improving fuel efficiency. For example, the company established a fuel efficiency committee with a vested responsibility of ensuring the company's vehicles are fuel-efficient. Furthermore, the company has invested in quality improvement to ensure its vehicles meet quality standards. The company's international strategy is different from the competitors since it focuses on the cost, efficient and design of the vehicles. Competitors, such as Fiat Chrysler automobiles have invested in high-end vehicles, creating an opportunity for middle-income earners.

Threats to Global Competitiveness

Various disruptions are posing significant threats to the success of Toyota Company. The first one is the development of autonomous cars that allow people to share cars; thus, limiting the number of people buying new cars for personal uses (Toyota 1). By 2015, Tesla's car models were 90% self-drivable and the company believes that the industry is changing, especially in developed countries where the autonomous cars will fill the roads. The industry estimates that shortly, most people will consider buying self-driving cars. In this regard, Toyota is facing a serious threat since it must change its line of production to meet the market trends so that it meets client expectations.

Another trend in the automobile industry is that many people in cities are considering vehicle-sharing as the most effective way of managing environmental pollution. It is also cost-effective to share a vehicle than owning a vehicle individually (Bloomberg Intelligence 2). Although the acceptance of autonomous vehicles has not generally gained popularity in many countries, people have started sharing vehicles in big cities. In this regard, the company should focus on customer-care services and focusing on the manufacture of autonomous vehicles so that it will catch up with the industry trends (Ansoff 21). Also, the company should consider penetrating new markets that have not considered the concept of autonomous vehicles and this will promote the company's sales.

Conclusion

The automobile industry is changing and is facing serious challenges than before. Toyota is among the leading automobile companies internationally. The company has a stable market share in the United States and China. The company's success is based on the fact that it differentiates its vehicles from the competitors, considering the income stability of many target customers. For example, it has invested in research and development to develop new designs of engines and vehicles that enhance safety and fuel efficiency. Also, it has invested in the manufacture of hybrid vehicles. However, it should consider penetrating new markets and develop a new design of vehicles to match the industry trends.

Works Cited

Ansoff, Igor. Strategic Management. London: McMillan. 2016. Print.

Bloomberg Intelligence. Global automobile manufacturing industry outlook. 2019. Web. 18 April 2020.

Sano, Nao. Inoue, Kae & Buckland, Kevin. Toyota to target tripling China production over next decade. Bloomberg, 2018. Web. 18 April 2020. Statista. General Motors Company's vehicle sales by key country in FY 2019 (in 1,000 units).2020. Web. 18 April 2020.

Tajitsu, Naomi. China sales buoy Toyota's profit, but U.S. weakness persists. Reuters.2019. Web. 18 April 2020. Toyota. Toyota Motor North America reports December 2019, year-end sales. 2020. Web. 18 April 2020.

Toyota. Overview. 2020. Web. 18 April 2020.