SmithC- Econ600- Project 2

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Running head: COMPETIVENESS AND FUTURE OF THE U.S AUTO INDUSTRY 1 Competitive Landscape and Future of the U.S. Auto Industry Ciara Smith American Military University Econ600: Managerial Economics Fereidoon Shahrokh 29 October 2023

COMPETIVENESS AND FUTURE OF THE U.S AUTO INDUSTRY 2 Abstract This research study uses Porter's Five Forces framework to present a detailed analysis of the U.S. auto industry, offering insights into its competitive dynamics, market structure, and prospects. Deeply rooted in American history, the car industry in the United States faces severe rivalry among established competitors, high obstacles to entry, developing supplier relationships, and the influential roles of both consumers and dealerships. As new mobility choices grow, the mild threat of substitutes creates a dynamic backdrop. The industry must stay agile and imaginative as it moves toward electrification, autonomy, and sustainability. The future perspective is characterized by revolutionary developments like electric and autonomous vehicles, shifting customer tastes, and evolving regulations, which necessitate strategic acumen for long-term success in this fast-changing market.

COMPETIVENESS AND FUTURE OF THE U.S AUTO INDUSTRY 3 The U.S. Auto Industry The American motor industry has grown extensively for over a century. The development of this industry is highly linked with the fabric of the history of the United States. The country's auto industry dates back to the 19th century, with significant turning points such as the 1886 creation of the first gasoline-powered car ( Dudukalov et al., 2020). The modern era of the American auto industry is marked by the manufacturing of the legendary Model T in 1908 and 20 th century-innovative development of the assembly line by Henry Ford. By using increased innovation, Ford improved the accessibility and affordability of automobiles in the modern era of the Auto industry to wider demographics ( Olabi et al., 2021). As a result, the American auto industry realized the mushrooming of major companies such as Stellantis, Ford, and General Motors (G.M.) currently controlling the U.S. Market. These companies have a long history of creating recognizable automobiles. The automobile industry has a significant impact on the American economy. The industry employs millions of Americans, particularly in businesses such as producing car parts and manufacturing motors ( Olabi et al., 2021). Along with its direct repercussions, the automobile industry impacts the future of other sectors, including steel, rubber, electronics, and transportation. Environmental challenges have greatly impacted the growth of the sector. Because of the ongoing changes in laws and regulations requiring lower emissions and more efficient fuel consumption, there have been significant changes in the production processes in the American auto industry ( Dudukalov et al., 2020). The industry has also made considerable advancements in developing electric and hybrid vehicles to respond to shifting environmental requirements.

COMPETIVENESS AND FUTURE OF THE U.S AUTO INDUSTRY 4 The American auto industry is still at the forefront of technological advancement. It has consistently innovated in terms of connectivity, safety measures, and autonomous driving technology ( Olabi et al., 2021). Electric vehicle (E.V.) advertising shows how committed the industry is to employing cutting-edge technology and sustainability. Globalization has also had an impact on the American auto industry ( Dudukalov et al., 2020). To demonstrate how linked the business is on a global scale, major American automakers operate abroad, and foreign automakers have established production sites in the U.S. However, the sector faces several difficulties, such as shifting consumer preferences, trade conflicts, and tough rivalry from international automakers. The rapid adoption of electric and driverless vehicles, increased reliance on innovative materials, and steadfast attention to sustainable practices are notable trends ( Olabi et al., 2021). Government regulations and policies play a significant role in influencing the direction of the industry. For example, some approaches, such as the Corporate Average Fuel Economy (CAFÉ), are a government effort to ensure that consumers in the sector get fuel-efficient automobiles ( Dudukalov et al., 2020). Furthermore, the government provides subsidies and incentives that encourage the use of electric vehicles. In short, this government's active involvement in the actions and activities of the industry determines how the sector will develop. Recent events show how dynamic the sector is. Partnerships and mergers, like the one that created Stellantis when Fiat Chrysler and Peugeot merged, reflect the industry's continual development ( Olabi et al., 2021). The COVID-19 pandemic also greatly impacted sales and production, necessitating extensive adjustments to operational plans and adjusting to the shifting nature of the market ( Dudukalov et al., 2020). The competitive environment of the U.S. car

COMPETIVENESS AND FUTURE OF THE U.S AUTO INDUSTRY 5 industry may be fully understood in light of this dynamic interplay of forces and historical antecedents. 3.1 US Auto Industry Definition The automotive industry in the U.S., also called the American auto sector, comprises an intricate network of vehicle manufacturers, sellers, distributors, producers, businesses that design, suppliers, and a network of manufacturers. The industry represents a vital part of the U.S. economy with a rich historical legacy that has liver for over a century. American auto industry produced a wide range of vehicles, from traditional fuel-powered engine trucks and cars to hybrid and electric motors that aimed to meet the diverse needs of customers. The industry extends beyond the U.S. borders as it plays a significant role in international trade and innovation, contributing to economic growth, creating jobs, and technical advancements on a global and national scale. 3.2. U.S. Auto Industry Market Structure The market of vehicles in the United States comprises a market structure called oligopolistic competition. The sector has an oligopolistic competition market because it contains few key companies or competitors with significant power. Such companies include Chrysler, now named Stellantis, Ford, and General Motors ( Barwick et al., 2021). Additionally, the market is oligopolistic primarily because the few mentioned competitors dominate it. However, the level of competitiveness in the American auto market has increased due to the admission of additional companies from the international market ( Dobbs, 2014). There is a high degree of vertical integration in the American automobile market mainly because of numerous manufacturers, designers, distributors, and automakers with different facets of the automotive lifecycle.

COMPETIVENESS AND FUTURE OF THE U.S AUTO INDUSTRY 6 However, outsourcing and cooperative agreements with suppliers are becoming more popular. The distribution and maintenance of cars rely heavily on dealer networks. The wide variety of components needed for vehicle manufacturing is provided by suppliers, each with its competitive dynamics and negotiating ability Barwick, P. J., Cao, S., & Li, S. (2021). Constant technological advancement, notably in electric and driverless vehicles, gives the market structure a constantly changing character. Regulations like those governing emissions and safety requirements impact automakers' development and manufacture of cars. Additionally, both domestic and foreign automakers operate abroad, making the American auto industry a part of a worldwide network ( Dobbs, 2014). This interconnection affects competition and strategic choices by adding to the complexity of the industry's market structure. 3.3. U.S. Industry Future Outlook The automobile industry in the U.S. provides a promise that it is about to undergo massive transformation. The shift from traditional fuel or gasoline-powered vehicles is a prominent trend that indicates that the sector is accelerating toward an enormous response to environmental needs and concerns as well as the ever-changing preferences of consumers ( Giampieri et al., 2020). Established automotive manufacturers in the United States are investing heavily in the production of E.V. technology, and several new entrants are also headed to the creation of electric vehicles. It indicates that Americans will have a diverse range of cars because of the broader field of electric vehicles ( Giampieri et al., 2020). The advancement of autonomous cars has the possibility of development, investment, and research in full swing. Such technology can potentially reshape urban planning and the mobility of people. Sustainability and emissions reduction are central to the industry's future, with stringent government regulations driving automakers to produce more environmentally friendly vehicles.

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