Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

Evolution of the Automotive Industry

Vincent Ramirez
RWS 1301
Professor Gallardo

Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

Abstract
This paper gives insight into not only the evolution of the automotive industry but reasons as to
why this evolution occurs constantly. The purpose of this paper is to inform the reader about this
evolution, not whether this evolution is bad or good, but merely to advise readers to be aware
that it affects society and can have an unseen or unknown presence on us. This will be done by
presenting facts and information from the last 10 years to help support this idea. More
specifically, this paper will cover how the economy and social trends as well as other crucial
factors can weigh in to the ever changing automotive industry and how they go about in
evolving.

Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

The evolution of the automotive industry is an occurrence that happens constantly. The
way it manifests itself however, is very different from any past evolution. This could be a
technological evolution or a cultural one. Sometimes this evolution can be a setback. It can vary
from a new alloy that will decrease the weight of a car without decreasing its overall strength as
well. Whatever the case, the auto industry is always changing.
The purpose of this paper is to inform the audience as well as give a brief overview of the
ways the automotive industry has evolved within the past ten years. It will also go over the
driving factors behind this evolution as well as how this affects society as a whole. One thing
that can be taken from this paper is not whether evolving within the automotive industry is good
or bad but, to recognize that it is happening
Before going into the topic over the evolution of the automotive industry, a brief
description should be given first. For starters, according to some historians, the first turning point
for the automobile and the industry was the creation of the engine. This occurred in the 1700s.
After that, the first four-stroke internal combustion engine was created around 1876. This engine
is most similar to the engines of today. Going forward in the timeline of the automotive industry,
the 1920s was a time for building the infrastructure for companies like Ford, Chrysler, Dodge,
and others. Likewise, major roads projects and a national road system became instituted.
According to Shetty, one idea as to why the automotive industry evolves can be understood using
the Porter Five Forces Theory. (2014). The Porter Five Forces Theory is one developed by
Michael E. Porter and is a strategy used to analyze the competition within an industry as well as
a business strategy.

Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

The Porter Five Forces Theory is based on five factors: degree of rivalry, threat of
substitutes, barriers to entry, and buyer and supplier power. These five factors play a role in the
evolution of the industry and for companies within the industry. Each company would have to
change in order to see that factors such as these do not hamper their success. The first factor is
degree of rivalry. What this means is how much competition is there in the industry. Based on the
findings of Shetty, although there are ratios that are seen in the U.S. which tell that there should
be less of a competition, the U.S and global market are actually quite competitive. The three
major companies (Ford, General Motors, Daimler Chrysler) are still very much dominant within
the industry and market, but other carmakers such Honda and Toyota are fierce competitors
outside of the country as well as inside. Like Shetty said, The U.S is no longer the playground
of the Big 3). Those 3 companies have expanded themselves to overseas and have presence
within foreign countries.
The second factor in the industry is the threat of substitutes. What this means is that even
though cars are an everyday necessity and convenience for people, there is a fair share of people
who do not view cars as a necessity and prefer to use other modes of transportation like a bus
and others who just cannot afford cars and do not have the ability to purchase one. Now there is
some sense in believing that cars are not necessary and that taking a bus or walking or biking can
be just as good as car. For starters, it is less costly. What automakers are doing is producing a
large quantity of cars and make it seem that these cars are very much necessary and can be quite
affordable. That much is true too. As the world continues to develop, the need for automobiles to
travel will be there too.
The third factor is barriers to entry. It takes a vast amount of resources to startup a
company. The cost itself will be great let alone having to find a location for a factory and
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Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

building will difficult. However, companies that have already established themselves and are
looking to expand their operations to another country have a better chance of starting their
businesses. This can be done by a merger of that company and another one or buying out another
business. So, established companies can quite easily startup a new factory in another country,
whereas a freshly started one will need to overcome intense obstacles and can even be bought out
by the larger businesses.
The fourth and fifth factors go hand in hand as these are buyer and supplier power. The
buyers of the industry have great power as they should. They have the power to dictate prices
Shetty said, and this is what gives them power. Furthermore, the suppliers, which includes
automobile parts, are commodities and can only be used in cars. But in this relationship, the
consumers have the greatest power as they are the ones who are purchasing these cars.
With that being said, there is a lot that is taken into consideration when the automotive
industry evolves but, how does this affect society? For one, this is a market and markets are
taken into account in a countrys economy. The state of a huge car company and possibly the
closure of factories can definitely affect a countrys economy. But more specifically is that
something like this can mean the people are fired and out of a job. The ways that society is
affected by this is a direct approach, being let go from that job, and indirect, the economy taking
a sudden hit. Nevertheless, the automotive industry and its changes and adapting does have an
influence on society. Like the article written by Hirsh explains, Faced with powerful new forces
and consequences for the sector, automotive companies clearly have their work cut out for them
(2015)
The automotive industry is meant to change and adapt. It is a fact that all things in life
change at one point in time. The thing is, the industry is always changing one thing that can stand
5

Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

out is that a good percentage of people own cars. It is beneficial to be aware of these changes that
occur within the industry because it does affect people. Furthermore, the future cars will be made
to the consumers and that in itself is one of the greatest factors of the evolution of the
automotive industry.
In conclusion, the auto industry will continue to change whether people realize it or not.
Companies will continue to go about their business as usual without anyone realizing it. So, the
main the point of this paper is not to say that evolving is bad and should be feared or that is
awesome, but to inform people that it changes constantly and to take into consideration that
people should be aware of it and how much it can affect their everyday lives.

Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

Shetty, C. Automobile industry analysis.
http://www.academia.edu/4525379/Automobile_Industry_Analysis
In this online article based on this authors research, Chirag Shetty explains that the automotive
industry has been evolving for a number of reasons. These include: innovations in fuels, vehicles,
components, societal infrastructure, and marketing practices. However, they go on to say that
some historians view the turning point in the automotive industry was the creation of the engine.
Chirag also goes on to explain the 5 points of Porters Five Forces Analysis. This analysis shows
five influences on the automotive industry and its effect on it evolving. These points involve:
degree of rivalry, threat of substitutes, barrier of entry, and buyer and supplier power.
This online source is useful to the topic at hand because one must learn the overall history of the
topic as well as some theories to how and why the automotive industry changes constantly.
Another way this is helpful is that it gives a brief summary of each motor company and what
they have to offer the industry.

Michigan Economic Development Corporation. YouTube. (Jan 21, 2015). The evolution of the
automotive industry. https://www.youtube.com/watch?t=5&v=-LBC1eBYDqg
This online video talks about the automotive industry in the United States, specifically in
Detroit Michigan. In this video, Kevin Kerrigan, senior vice president of the Automotive Office,
goes on to say that the next 10 years will be a very innovative time for the automotive industry
and that it is currently seeing more change now that is has in the past 100 years. Furthermore,
almost 75 percent of this development and innovation can be seen in the U.S, in Detroit,
Michigan.
Although the video is somewhat short in length, it provides a good amount of information
relevant to the topic, which is the evolution of the automotive industry. It provides a perception
that most of the change that is happening is occurring here in the U.S. The information provided
can be used in relation to the history of the automotive industry and its constant evolution.

PWC. How to be no. 1: Facing future challenges in the automotive industry.

http://www.pwc.com/gx/en/industries/automotive/publications/how-to-be-no-1-facingchallenges-in-the-automotive-industry.html.
Based on this authors findings, the online article is a tool and shows how to be a
contributing force in the auto industry in 2016 by going over challenges that companies will be
forced to deal with in order to be successful. The author first starts off by stating the U.S. and
China have broken sales records year after year. In other words, business is good. But there are
also some challenges that they will need to overcome in order to stay successful.
The information in this article is useful to the topic because it is also important to
understand the challenges that automotive companies face on a year to year basis. These

Running Head: EVOLUTION OF THE AUTOMOTVE INDUSTRY

challenges can either make or break a company and it is up to them to find a way to overcome
these obstacles and continue to evolve with the rest of the automotive industry.

Hirsch, E. Strategy&. 2015 auto industry trends.

http://www.strategyand.pwc.com/perspectives/2015-auto-trends
Under the assumption of both the tile of this article and the information contained, this article
goes over the trends of the automotive industry and the trends that are presently viewed in 2015.
It goes the trends that prove to be the most difficult and challenging to auto companies.
According to the author, the challenge that is most immediate is the unevenness of global
markets. What this means is that while the market in North America is striving, markets in other
places of the worlds are either currently in slumps or just coming out of them. He then goes on to
explain driving forces and shifts in global markets that effect the auto industry.
Like the other sources, this article is useful because it gives you the information about trends in
the auto industry and this is crucial to the evolution of it. Global markets affect sales and in turn,
affect production of cars. This may hamper the change and progress in the industry.
SelectUSA. The automotive industry in the united states.
http://selectusa.commerce.gov/industry-snapshots/automotive-industry-united-states
Based on the author and the material in this article, this article is about the U.S
automotive industry and its performance. According to the author, the industry in the U.S. has
sold about 8 million automobiles annually between 2008 and 2012.They then go on to say that
the U.S has one of largest automotive markets in the world and contains in it 13 companies. Also
they provide information about the development of the first Honda plant here in the United
States back in 1982. Since then, almost every foreign automaker has a plant located here in the
U.S.
The information here focuses more on the United States and its role in the global market
for the auto industry. It is useful because it is vital to have an overall understanding of the U.S.
auto industry and how much of an influence it has overseas as well as here in the country.