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 AutomotiveAutomotive: An Industry Overview

In terms of revenue, the automotive industry is the world’s most important economic sector; indeed, around the world, there are more than two billion vehicles on the road. The industry is not solely limited to the manufacture of vehicles, but also relates to the ancillary trades around the design, development, marketing and selling of motor vehicles. With most of the developed world becoming increasingly reliant on motor transport and with developing nations fast catching up, the automotive sector has great potential for growth and wealth generation both for now and in the medium and long-term future. For the UK, the automotive sector generates nearly 10% of UK trade in goods and accounts for 3% of UK GDP.

Worldwide production of motor vehicles has grown from around 54.5million vehicles produced in 1997 to 89.7million in 2014. Whilst developed markets are reaching their peak, there is still much opportunity to grow in these countries; additionally, developing markets such as the BRIC countries (Brazil, Russia, India and China) are growing in importance to this sector’s potential for revenue generation. Some research also suggests that Iran and Indonesia could be the next significant markets for the industry, although the challenge for most companies wishing to exploit such opportunities will be applying their expertise in such new markets.

A shift in consumer demands means that buyers are expecting more for their money and have fallen ‘out of love’ with automobile brands. Sales by volume aren’t likely to dip because of this, but the price people will pay for vehicles will be determined by the emotional connections they have with the vehicle manufacturers. Mass market manufacturers continue to catch up with luxury car makers, with many previously ‘extra’ features becoming increasingly expected to come as standard, thus driving up costs for OEMs whilst pressure remains on to reduce prices at retail. The situation is further exacerbated by regulators demanding more advanced safety features be included as standard, also adding to costs.

The challenges for the sector are differentiation and innovation. Vehicles are increasingly similar between OEMs, with little to differentiate and brand capital is becoming a key influencing factor in purchase decision-making. Innovation in the automotive sector appears to be limited, although the advent of self-driving vehicles is perhaps one of the biggest opportunities for manufacturers to showcase their innovative nature and differentiate their respective offerings.

Automotive Sector Expert

Brian Farrugia - Managing Partner and : Travel & Transportation, Automotive, Service Industry and The Collaborative EconomyBrian Farrugia

To find out more about Brian’s views and insights on the Automotive Sector read his blog.