Automotive Industry: The Key Industry Drivers

There are four main business drivers that impact the automotive industry: economic conditions, consumer preferences, government, and technological advancements. Globalization also influences the industry to a large extent. In this article, we will discuss each of these business engines in detail.

Economic conditions:

The first key factor is economic conditions. When economic conditions are favorable, people are more likely to buy new vehicles, which gives the industry a boost. The slowdown in economic output is reducing consumer and business confidence and vehicle consumption levels are falling.

Automakers need to plan their capacity to achieve scale growth. Companies plan their capacities according to their sales forecasts which are totally dependent on economic cycles. The capacity problem has a strong influence on the economics of the industry because vehicle prices are calculated on planned capacities and reduced capacity means higher unit costs. Car manufacturers are therefore strongly affected due to economic conditions.

Consumer demand and interests:

The second key factor is consumer interest, preferences and demand. There is a growing demand for more choice. Volume production could become similar to high-end cars, with more vehicles made to order based on multi-option choice. The niche vehicle market is growing as consumers demand more variation in body shape and style. This led to a variety of body shapes being built on standard platforms.

There is an increased awareness of occupant and pedestrian safety, and consumers are also looking for greater fuel economy, exemplified by rising fossil fuel prices. Consumers are becoming more specification aware and are looking for the inclusion of more in-vehicle electronics and telecommunications systems. Automotive safety is extremely important to consumers in all markets and consumers are willing to pay more for vehicles with safety features.


The third key factor is globalization and global industry influences. Today, the modern global automotive industry operates in a competitive global market. The globalization of the automobile industry accelerated considerably during the last half of the 1990s due to the construction of major facilities abroad and the implementation of mergers between giant multinational automobile manufacturers. The world’s largest automakers are investing in production facilities in emerging markets to reduce production costs. Automakers have merged and, in some cases, established strategic business partnerships with other automakers, allowing them to expand into overseas markets.

The increase in global competition among global manufacturers and positioning in foreign markets has divided global automakers into three tiers, the first tier being GM, Ford, Toyota, Honda and Volkswagen, and the other two tier manufacturers tempting to consolidate or merge with other lesser manufacturers. tier-one automakers to compete with tier-one companies.

Technological innovations :

The fourth key factor significantly influencing the automotive industry is technology. Automakers are looking to leverage sophisticated technology to cope with competitive pressure and meet growing customer expectations for quality and cost. Advancements in technology help them add value to their vehicles and offset the squeeze on costs and profit margins. Technology also helps them meet the requirements of environmental legislation. It is through technology that manufacturers are able to meet consumer demands for increased safety and sophistication.

Other innovations of interest to consumers include features that improve navigation, such as GPS, and features that improve entertainment, including satellite radio and in-car access to digital music.

In terms of the vehicle, innovations likely to be in demand are more electronics and telematics, a move to a 42-volt electrical system, safety upgrades, remote control steering, braking, ABS and suspension. electric. There could be continued development of electric, hybrid and fuel cell engines, especially for city cars and fleet vehicles.

Features likely to be introduced could be sophisticated route guidance, cross-model route planning, lane guidance and proximity radars for speed control and warning systems. The consumer in this sector always demands innovation and technology-driven innovations such as fuel-efficient, safer and more comfortable low-emission vehicles will shape the future of the industry.

Government and regulation:

Government is the fifth key driver of the automotive industry. Legislation is a major industry driver; emissions and recycling legislation has a strong impact on both in-vehicle technology and construction. In many countries, governments have imposed strict environmental regulations on fuel economy and emission control on car manufacturers. These environmental laws vary by country and define mandatory standards for all vehicles sold in these countries. This has a huge impact on global automakers as they have to keep updating the products they sell in different parts of the world to comply with these regulations. This can significantly increase manufacturing costs.