After emerging from one of the most difficult economic periods in U.S. automotive history, industry executives should have a positive outlook. Sales of domestic brands are up. Companies who accepted bailouts are paying back the government. And corporate restructuring has whittled down the number of brands and dealerships competing for business. Instead of feeling optimistic about the future, many executives have significant concerns – all of which will impact marketing over the next several years.
A new Booz & Company survey found that auto and parts manufacturers fear the recent restructuring was not significant enough. Senior managers do not believe that industry will yield a return on capital. And about 1 in 3 surveyed executives expect a major automaker will fail before 2014. The specific market challenges faced by automakers include:
- Increased competitive pressures: 67%
- Pricing: 52%
- Macroeconomics: 45%
- Labor relations/legacy costs: 34%
The competitive pressures will not come only from existing players in this industry. Executives are watching China closely. Half of the managers surveyed by Booz & Company predict that Chinese-made vehicles will approach the quality levels of domestic-made vehicles within 5 years. Currently, the real nature of future competition is uncertain. The basis for competing could be product excellence and technological innovation, says Scott Corwin, a Booz & Company partner, or the key players could use pricing strategies.
From a marketing perspective, Corwin encourages manufacturers to:
- Focus on American heritage and help consumers connect with simpler times
- Promote vehicle quality, durability, reliability and technological features
Interestingly, most industry executives, 75%, are not looking at hybrid, diesel and electric to take the market by storm. These alternative drivetrains will likely account for less than 20% of the industry sales by 2020. But the study results leave little doubt. Competition will remain intense in this industry and marketers will need to stay at the top of their game from a promotional perspective to win new customers.[Source: New Booz & Company Survey Finds U.S. Automotive Executives Skeptical about the Industry’s Economic Recovery. 20 Apr. 2011. Web. 10 May 2011]