i.The concentration of market share in the automotive industry has been highly concentrated in the past, however as the industry transforms from an American dominated to a global competition, the industry has become increasingly fragmented. For the month of September of this year, the top four automakers (GM, Toyota, Ford, and Chrysler) made up 67% of U.S. light vehicle sales. However this number has become increasingly less concentrated over the past few years. International markets are much more fragmented than U.S. markets as countires like India and China have taken a serious stake in Asian sales with their cheap and efficient vehicles by China’s “Chery” and India’s “Tata” which are currently the two fastest growing car companies in the world. ii.As global free trade has become cheaper and less restrictive, competition among the world’s automakers has become fierce. The biggest gainers in this new playing field are the countries that have the lowest production costs and least restrictive government regulations. The losers have clearly been the once-dominant American automakers that have been caught off-guard by their rising production costs and fierce competition from abroad. iii.As market growth slows due to a global economic slowdown and fixed costs increase along with high commodity costs, the rivalry among automakers around the world is only expected to increase for the foreseeable future.
B.Threat of Substitutes
i.For most of the history of the automotive industry, the market has typically been considered to have a fairly high elasticity. This means that although the prices may rise and fall, people will still continue to buy automobiles because there aren’t many reasonable alternatives. However as fuel prices have soared to unprecedented numbers the industry appears to have begun to reach its elastic point with consumers. Petroleum based transportation costs have become so high, many...