Global Recession and Automobile Manufacturers - Essay Example

Over the past years, the global recession made a very clear impact in the economy. Every industry was greatly affected by its downside, which is the depreciation of the value of currencies, as well as, its continuous instability. The automobile industry is one of the major business industries that have been affected by the ongoing recession. This includes all aspects in the automobile industry, from maintenance, tools, service and most especially automobile sales. Automobile manufacturers are in a struggle in terms of market competition and keeping the business going. A very good example for this is how manufacturers design the specification of the newer models that are launched in the market. Another result of the global recession is the overwhelming increase of prices of materials used for production in the automobile manufacturing industry. Because of this, production cost for automobiles went up, which resulted to higher capital cost for automobiles. Consumers are not in the mood or rather refraining in engaging in big-ticket purchases, which resulted to low generation of revenue through sales (Crescenzi 2008 p.193). Major automobile manufacturers are now focusing and concentrating in the features and benefits of each model. Since automobile sales have been decreasing drastically over the past year, this proves that the market has lost its capability to buy. And if they could, they become more cautious and concerned about the automobile’s features and the benefits they can get from the automobile. Considering that transportation is one of the most important aspects in everyday life, not only with businesses but households as well, the automobile industry has taken advantage of this aspect to generate demand of supply in the market. This is one strategy to somehow level the ratio of market demand against production and automobile sales. The global recession’s effect in businesses and households is mainly on the income and revenue side. Since prices of petroleum products drastically went high numerous times in the world market these past few months, the need of maximizing revenue and funds against businesses and household expenditures for transportation and automobile maintenance was addressed by upgrading and innovating new automobile features. Engines that are low in maintenance and low fuel consumption had been a recent addition to the newer models that was launched in the market. Non-price competition is a form of traditional automobile market competition that was further inspired by the decrease of market demand and sales due to the global recession. In this aspect the advantage will clearly be in the end user or consumer side, giving them the power to choose from a wide range of models, features and benefits that will be efficient to their requirement of everyday use. On the other hand, this clearly proves how high the competition is for consumer preference in the market and how automobile dealers are struggling to stay in the industry. Non-price competition within dealers of the same brand has also been visible in the market. In this case, two dealers would carry the same brand of automobile manufacturer. Dealer X gives out a lower price with their promotional sales, on the other hand, Dealer Y is giving it at the standard market price but has more dealer services included in the package. This strategy is often used to attract a specific market that may be looking for the best price or the best service available. Automobile dealers also give dealer warranties. In addition to factory warranties that come along with the automobile, dealer warranties are also given and are to be shouldered by the dealers. Consumers can now have more options to decide which deal would best fit their budget. The consumers get the best deal out of this because of the additional features and extended warranty they could get from the package. These additional features and extended warranty can also give an open sales opportunity for dealers in the automobile industry. Another strategy of the automobile industry to be flexible and generate sales is by through special pricing and interest rates on financing purchases. Aside from giving their customers deals or terms that could be stretched to the fullest possible duration, dealerships also offer lower interest rates for buyers. The value of price will be one major factor in determining market shares (Ross and Trachte 1990 p.121). Aside from the new features and benefits that are really economic in considering the price of maintenance and petrol, and the non-pricing competition that dealers have in the automobile industry, buyers can now get cash back on their tax returns. This benefit that came from the government is also a great help the automobile industry in this time of crisis. The automobile industry is also taking advantage of this benefit to generate sales in the market. In addition to that, the cash back is one strategy the automobile industry is using to be flexible in this time of economic crisis due to the global recession (Gott 2009). The impact of the global recession in the automobile industry has been very transparent. It had affected all the aspects of the industry beginning from the increase of prices of petroleum products in the world market, prices of materials used for automobile production, maintenance, and the decrease of demand in the market which resulted to lower automobile sales which had been recorded to be the lowest in years. Closure of other businesses that require transportation services and that are former potential market for the automobile industry has been a great loss for them in terms of generating revenues based on automobile sales. The industry’s struggle to stay in business at the peak of the global recession is obvious, and trying to rebound from this crisis would take years. However, the efforts of the automobile industry to be flexible in the time of crisis had paid out during the peak of the global recession. By taking advantage of factors in the market, the automobile industry caters to the market in which transportation is a necessity. Adding new and economic features to the newer models of automobiles, the non-profit competition of dealers, and other benefits from the government has all been fully maximized and has been very successful in generating demand and sales in the automobile industry. The severity of the impact of the global recession is devastating for the automobile industry in-terms of sales revenue, but with flexibility in prices, features and benefits, service and other supporting aspects, the automobile industry has been able to manage to go through all obstacles and dilemma that was caused by the global recession. Crescenzi, Anthony. (2008). Investing from top down: A Macro Approach to Capital Markets.. NY: McGraw-Hill. Gott, Lena. (2009). “New Car Tax Rebate – Obama Economic Stimulus Plan.” Suite 101.Com Media Inc. Retrieved July 29, 2009 http://personal-tax-planning.suite101.com/article.cfm/new_car_tax_rebate_obama_economic_stimulus_plan Plunkett Research. (2009). Automobile Industry Market Research and Competitive Analysis. Plunkett Research, Ltd. Retrieved July 27, 2009 http://www.alacrastore.com/storecontent/Plunkett_Research-Automobile_Industry_Market_Research_and_Competitive_Analysis_2009_from_Plunkett_Research-2082-9 Ross, Robert and Trachte, Kent. (1990). Global Capitalism: The New Leviathan. NY:SUNY Press. Verma, Sonia. (2009). “Impact of Global Recession on India.” Merinews.Com. Retrieved July 29, 2009 < http://www.merinews.com/catFull.jsp?articleID=15709750> Read More