The Economic Climate Of The Automotive Industry Essay

The Economic Climate Of The Automotive Industry Essay

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Given the current economic climate, I think the automotive industry is going to be faced with a multitude of economic challenges in the next five years. An oligopoly, the auto industry is highly dependent on strategic decision making, and the demand for dynamic innovation and supply at decreased-cost levels. Competition and substitutes are seemingly leading factors in shifts that face the current industry in the near future; as well as political changes – locally and abroad.
With the upcoming Presidential election, there is a very real possibility of big political changes, as well as, some major changes to international trade policies facing the American Automotive Companies. Britain recently voted to exit the European Union; this event, which is being called Brexit, is having a ripple effect across the world. The full effects of Brexit won’t be known for two years or more, but with the automotive industry having such a large presence in the U.K, an anticipated change is in effect. In general, for the next two years, global automakers will need to pay attention to the market; be prepared for unanticipated changes; and the possible need for contingency plans in the future, as negotiations take place between Britain and the EU. Ian Fletcher, London-based principal analyst for IHS Automotive, said “We haven’t seen a dramatic change in demand. The one thing that could dampen the market is if the exchange rate gets weaker.” (Wayland, 2016) With the decreased value of the Euro, Ford Motor Company has already reported a $60-million-dollar loss as an immediate repercussion of Brexit, and predicts losses of $400-500 million per year due to this. (Egan, 2016)
Next I see the area of technological advancements being one of which competition...

... middle of paper ...

...fare, as with less vehicles on the road comes less accidents; insurance rates would drop; and people would have more money to use on other things, such as buying homes and investing in other markets. In today’s economic state, it’s undeniable that the automotive industry is at a fundamental cross-roads. Looking forward to the next five years, I expect drastic changes within the industry. I believe through innovation and integration, the industry will see a drastic shift in demand towards robotic and information technology. The questions of whether personal vehicle ownership will become more of a desire than necessity, and whether driver-less vehicles will invade the trucking industry will remain to be seen. Although there are clues and evidence of great changes being made, the evolution of the auto industry remains a mystery, you never know what could happen next.

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