The Global Car Industry in 2004

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Case Details:

Case Code : ECOA126
Case Length : 12 Pages
Period : 2004
Organization : -
Pub Date : 2004
Teaching Note :Not Available
Countries : Global
Industry : Auto and Ancillaries

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction

In early 2000s, the car industry occupied a position of strategic importance in many countries. However, with increasing maturity, the industry's average profit margins had declined from 20% or more in the 1920s to around 10% in the 1960s and less than 5% in 2004. The car industry represented just 1.6% of Europe's stockmarket capitalization and 0.6% of USA's². About 20 years back, the corresponding figures had been 3.6% and 4.0% respectively.

In recent times, the automobile market in America, Europe and Japan, where over 80% of the world's cars and trucks were sold, had stagnated. Supply had increased vis-à-vis demand for several reasons.

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In countries like Germany and France, rigid labour laws had inhibited the closure of redundant factories. In America, the arrival of European, Japanese and South Korean makers and their aggressive plans to expand market share had also created overcapacity. Effective capacity had increased slowly but steadily as carmakers continued to improve their productivity...

Excerpts >>

1] This case draws heavily from "Perpetual motion," The Economist, 4th September 2004, Vol. 372, Issue 8391, pp.3-4.

2] ibid.

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