Competitive landscape. new car sales

COMPETITIVE LANDSCAPE
The new cars market will be analyzed taking car manufacturers as players. The key buyers will be taken
as consumers and fleet operators, and suppliers of commodity items, such as metals as the key
suppliers.
Rivalry within the new cars market is intensified, as a consequence of recent economical turbulences and
due to presence of strong, international incumbents.
Thenew cars market has a large number of buyers. Although switching costs are low, and buyers are
price-sensitive, manufacturers have invested significantly in brand building, which weakens buyer power.
Key inputs include commodities, like steel, the price of which may be difficult for manufacturers to control;
other inputs include as fabricated components, labor, etc. The stagnation and decline ofmajor markets,
as a result of the global economic downturn, together with the high capital requirements for viable
manufacturing scale, means that incumbents will generally not face much of a threat from new entrants.
This may however be subject to change, as these markets show signs of recovery. However, substitutes,
such as used cars and public transport, are likely to offer a very strongthreat to car makers. Years of
consolidation have left relatively few major players in this market, and concentration within particular
geographical regions can be quite high.
The new cars market will be analyzed taking manufacturers as players and end-users, both consumers
and fleet operators, as buyers. This assumes that the intermediaries (dealers) are transmitting end-user
demand fairlyreliably to manufacturers. The new cars market has a variety of manufacturers, with a high
level of product differentiation and therefore a high level of choice for consumers. Although many buyers,
for whom switching costs are low, will be price-sensitive, manufacturers have invested in brand building,
which weakens buyer power. Considering individual consumers, the market is essentially apolypsony,
with a large volume of vehicles being sold to an equally large number of consumers, which reduces buyer
power. A partial exception to this is the case of car leasing companies, which through bulk purchasing
and contractual arrangements can leverage favorable prices and exhibit an enhanced degree of buyer
power. Overall, buyer power with respect to the new cars market is moderate.
Keyinputs required by car manufacturers are typically commodity items, such as metals, as well as more
differentiated inputs, such as fabricated components, produced by other companies rather than being
manufactured in-house. With fairly low differentiation of raw materials, there is often little to distinguish
between suppliers, reducing their power somewhat. On the other hand, the high importanceof quality of
raw materials and components to the car manufactures (particularly when safety-critical) can enhance
supplier power. Globally, prices of primary raw materials used, such as steel and aluminum, have been
fluctuating significantly during the past few years, placing pressure on manufacturers' margins. The
upstream competitive landscape is relatively fragmented, although recentconsolidation in the steel
industry could boost supplier power. Typical suppliers are likely to sell to a wide variety of manufacturing
companies, with the car market likely to be contributing only a small share of total supplier revenues. This
further strengthens the position of suppliers. Overall, supplier power is moderate.
COMPETITIVE LANDSCAPE
Europe - New Cars 0201 - 0358 - 2009
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Brand strength and reputation are highly important within the new cars market, and it is therefore
relatively difficult for new players to directly enter a particular country's market. Those that succeed often
do so through the introduction of successful foreign brands. For example, the Indian manufacturer TATA
has...