FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY A SWOT Analysis On The Fuel Efficiency In Automobile Industry

FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 1

Running head: FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY

A SWOT analysis on the Fuel efficiency in automobile industry

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FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 2

A SWOT ANALYSIS ON THE FUEL EFFICIENCY IN AUTOMOBILE

INDUSTRY

Introduction

Global automobile industry is dominated by Europe, USA, Japan, and in the

recent China which has a significance influence on economic development, international

trade, foreign investment and environment friendly engagement. Global warming,

consumer sovereignty in demand aspect and fluctuation in crude oil prices are major

critical issues that are facing the automobile industry in the world. These issues can be

greatly managed and reduced by intervention in introduction of fuel efficiency innovation

technology in automobile industry.

In 2005 the Kyoto Protocol with mandatory limits on Green House Gas emissions

by industrialized nations coined into effect. The focus generally fell on the automobile

industry, which is the largest consumer of fossil fuels. 98% of the energy required in the

automobile was met by petroleum. The state is expected to deteriorate with the projected

vehicle stock of more than 800 million by the year 2030. The automobile industries are

mostly located in these developed economies such as USA, Germany, Japan, UK, and the

newly industrialized nations like China and India. For various competing automobile firm

to do well, they have to invest in new cost effective technologies offering improved fuel

efficiency with lesser Greenhouse Gas emissions in order to ensure creation of consumer

demand, play a role in combating global warming and reduce the impact of oil prices

fluctuations (Gopal, 2006).

10% of the global CO

emissions come from automobiles and policymakers are

increasingly tightening regulations on emissions from vehicle, little on the overall

FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 3

direction of the industry even as financial concerns move on to weigh on current players.

Challenges is not only to take the emerging technologies that the winners in the market

place as automobile- makers can afford to invest in all the potential solutions but also to

develop energy efficient vehicles.

Automobile industry in USA experienced a downward fall of the three big

automobile firms. These are Ford Motor Company, General Motors Corporation and

DaimlerChrysler. These three were losing to Japan and European auto-makers

(McLaughlin 2006).

Japan commanded a proportion of 16.7% of the production of automobile in the

world in 2004. They were the market leaders in light vehicle market. In Western Europe

which is perceived as the home foundation of German brands experienced Japan Vehicle

increase from 10.4% in 2001 to 13.1% by 2004 (McLaughlin, 2006).

China as the fourth largest producer of automobile after Germany is fast emerging

as the market of the future by introducing cost effective export to meet demand in the

Asian market. The domestic automobile companies are more dominant player in the

Chinese market.

India made its mark in the automobile sector in 2004 whereby the sale of

passenger car exceeding more than 1 million. The market leader was Maruti Udyog

which had a share of 51%; followed by Hyundai Motor and Tata Motors.

FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 4

Figure1. World Automobile Production in 2004

C hart T itle

17%

27%

26%

10%

J AP A N C HINA

EU NE W E U

INDIA E AS TE R N E UR OP E

ME R C OS UR US A

OTHE R S

Source: from VDA, (2005).

Ford automobile company focuses on increasing the development and production

of new vehicles with the aim on better models, fuel-efficiency, security and value attach

for customer with the their latest launches. This improvement on cars contributed the

total Ford vehicle sale to increase from over 33% in 2010 to 35% in the 1

quarter of the

year 2011. There was a display on consumer confidence in product of Ford in aspect of

fuel product. These products include Fiesta, Fusion, Edge and fusion which continue to

increase demand. This come in with the social cultural aspect of environmental concerns

for the need of fuel-efficient vehicles whereby many environmentalists have shown their

concern on the impact that the fuel cars have on the environment. This has resulted to

legislation that requires cars to average a certain miles per gallon.

FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 5

Ford strength in automobile industry include brand image, online marketing

capability, more consumer choices, operations and distribution efficiency as well as

relation with high profile companies. It has a high brand image which is well known in

the automobile industry. This image is well known in the global market due to huge

marketing and advertising which lead to great consumer knowledge on wide variety of

their product hence result in creating and increase in consumer confidence.

Online marketing capability helps the company in proving the online consumer

selection of cars through its website, where by the consumer is allowed to customize the

engine, color, interiors as well as exteriors.

Ford offers more consumer choices and it provides consumer more variety of cars

and commercial vehicles which are well diversified in aspect of performance, functions

and fuel efficiency. These varieties include cars, commercial and heavy vehicles.

Ford is rich in its operations and distribution as it operate it business in more than

30 countries and it has manufacturing process of more than ninety plants. Moreover, the

company has been in the forefront in maintaining relations with high profiled companies

like Suzuki and Isuzu Motors Company to develop qualitative vehicles and in the part to

technological aspect for motor company.

Weakness of Ford automobile include decline in it sales, low productivity, and

weakening operations in North America. Total sales of the company declined from the

year 2008 to 2009 due to global recession.

Ford low productivity which is as a result of ford expanding its business

operations in diversified geographical regions hence management end up missing the

focus on some aspects of performance which result to low productivity.

FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 6

Ford operations in the North America have been on the decline due to increased

competition from companies like General Motors and Toyota. Its revenue declined by

24%.

Ford opportunities are solidly based on focus to production of fuel efficient cars

and hybrid cars in the upcoming years and it aims in investing in electric, hybrid and

solar energy vehicles. Moreover the company has change to become more environment

friendly company and entered into joint ventures with some of the major competitors

with an aim of combating recession. Ford has entered into Asian market especially in

China and India which have large geographical market and population.

Ford threats include rise in raw material prices, rapid growth of competitors and

less capital spending. Price rise in steel and rolling steel and rapid rise and fluctuation in

fuel have a great influence on the margin price of the automobiles. Development and

growth of Ford may be affected by rapid growth of it competitors. Ford is also spending

lesser amount of funds in research and development programmes than its main

competitors.

Toyota strengths include its new investment in USA and china which saw its

profit rise. It has a wide and diversified product range which highly targeted marketing

and commitment to lean manufacturing and quality as it focus on fuel efficiency in order

to sustain and increase it market share.

Some of its weaknesses are that, Toyota being a global automobile company it is

affected by fluctuating economic and political conditions in its market. The company also

needs to keep producing in order to retain its operational efficiency.

FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 7

Toyota opportunities lie in its ability to produce vehicles which are environmental

friendly. The fluctuating rising prices of oil has led to increased sale of the new hybrid

vehicles. It has sold its technology to other automobile company as demand for fuel

efficient vehicles in the market increase.

As automobile company Toyota faces tremendous increased competition which is

a threat to the company. This competition is from China, South Korea and other new

plants in Eastern Europe. There is also constant rise in prices of raw materials such steel

and rubber as well as fluctuation and rise in fuel cost (Gutiérrez, 2003).

Conclusion

Fuel efficiency in the automobile industry is important for company since

consumer demand and regulation by environmentalist is based and influenced by fuel

efficiency. This is due to fluctuations and constant rise in fuel and global warming effect.

For a company to have command and sustain its market share and compete effectively it

has to invest on technology that lead to production of vehicles which have fuel efficiency.

FUEL EFFICIENCY IN THE AUTOMOBILE INDUSTRY 8

List of References

Gutiérrez, J. G (2003). “The Toyota Production System - A Transition from Mass

Production to Lean Manufacturing and Supply Chain Management,” Retrieved May 31,

2011, from

http://www.sachamber.org/councils/ecodev/toyota/ToyotaProductionSystem.ppt.

Gopal R., (2006), Global Automobile Industry Retrieved May 31, 2011, from

http://webcache.googleusercontent.com/search?q=cache:GovBsRCI5gkJ:www.ou

tsource2india.com

McLaughlin, K (2006). “The Big Squeeze,” Retrieved May 31, 2011, from

http://www.thefabricator.com/ShopManagement/ShopManagement_Article.cfm?I

D=1265.

http://www.freeswotanalysis.com/automobile/78-toyota-motors-swot-analysis.html

http://www.scribd.com/doc/32286545/Macro-Environment-and-PESTL-Analysis-of-

Ford-Car-Manufacturing-Ltd

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