The Automotive Industry Evolution: an Analysis of the Business Model of Today and Tomorrow

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Introduction 
 
 
Since the crisis in 2008, the car industry has undergone a deep crisis. In Europe and America, 
15% of car dealers have been forced to close or change activities and some of the world's largest 
car makers, General Motors for example, had to sell some brand of their groups. Many 
producers have managed to survive expanding into new markets characterized by strong 
growth, such as China, but the situation in the historically strong markets has not risen yet. 
Today, it seems that the amount of cars sold in the world has returned to pre-crisis levels, but 
despite this, the business remains not sustainable for many of the actors present in the past. This 
means that the causes of these difficulties are not entirely due to the financial collapse of the 
last decade.  
This work is aimed to analyse what are the factors that are negatively influencing the 
automotive business and propose possible solutions in order to make processes more efficient 
and thus make the industry more profitable. In order to do that, I will open the first chapter 
studying this market and its characteristics, first, on a global level, and then, focusing on the 
European situation, so as to understand what events are making the industry less sustainable. I 
will try to figure out in which technologies the biggest original equipment manufacturers 
(OEM) are investing. I will try to understand the structure of these companies, providing 
hypotheses on how to upgrade the business organization so as to make companies more 
flexible and thus able to adapt effectively to continuous changes in consumers’ needs. 
In the second chapter, I will study the market again, focusing on the point of view of the car 
manufacturers. I will first describe the new technologies that are being developed to make 
vehicles more efficient and environmentally sustainable. Next, I will be researching the
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impact that the internet has had on other industries and their customers, showing how the car 
market has lagged behind in adapting to this trend. Then, I will develop short-term strategies 
to make processes more efficient, based on digitalization of the customer experience and of 
the corporates organization, on customer satisfaction, and on increased fidelity to the brand. 
Always taking inspiration from the most successful digital companies on the world stage.  
New phenomena such as self-employed cars and self-driving cars will be shown, concluding 
with a reasoning on what might be the perception of tomorrow's car ownership. The purpose 
of the chapter is to try to understand how deeply it is evolving the market and how industry 
should evolve in order to formulate effective short and long term strategies capable of 
preventing consumer demand and thus able to bring the industry profitable again. 
The work will not be missed by the other important actors in the automotive sector: those 
who compose the dealer networks. The third chapter will be devoted entirely to them, opening 
with a comprehensive description of how the OEMs strategy, to maintain their business 
sustainable, are damaging the retailers. 
Sellers are those who are in contact with potential buyers and those who assist them during 
the buying process. So I will understand how today's consumer behaviour has changed when 
they are buying a car, thanks to the use of the Internet and the social networks. 
Once I will understand the ways and preferences of product searched by the customers, I will 
look into new strategies for retailers that are based again on innovation, digitalization of 
customer experience, business organization reconstruction, loyalty to the brand and 
management of the leads. 
I will describe in detail which units should be integrated within the business organization so 
that retailers can start an effective digitalization strategy and finally I will make predictions on 
how the tomorrow's seller's business model will be.
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To conclude, in the last chapter, I will select some business cases that have already started 
successfully in the world and are consistent with what was studied in my researches. They 
will be thoroughly analysed in a modal way to understand what are the strengths that give a 
competitive advantage above the traditional sales model and what are the points where the 
new market trends are still not well understood. Finally, I will start from these cases in such a 
way as to formulate a sustainable business plan that reflects what I learned during my work. 
The whole work is supported by graphic elements so as to expose my arguments more clearly. 
By data, published by the most important entities in the industry. From the results of 
questionnaires proposed by the most influencing consultancy agencies in the field of 
automotive. And finally, other scientific publications which will support the importance of 
many elements and strategies that I will illustrate.
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Chapter 1 
 
 
1.0 Introduction 
In 1964 at the New York Wold’s Fair, General Motors presented the Mustang. Through this 
car, for the first time, an automotive company was giving an eye toward a specific target 
audience, the one that would be later be called the baby boomers. At that time, the Ford 
general manager, Mr Lee Lacocca, successfully found a product that was able to offer a new 
idea of freedom to an exuberant generation. Ford estimated it would sell 100,000 Mustangs 
during the first year. By the end of 1965 they sold more than 400,000. The released of the 
Mustang was a turning point in the automotive industry: Ford shaped a car to a specific 
segment. The Mustang was not only a car, but a “freedom machine”, a means of both 
transportation and personal expression. This perception of automobile, affected the 
automotive production and distribution channels for over 50 years.
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Cars production is not only governed by the consumers’ needs, it is also affected by extensive 
regulation by the governments, by the need for fuel and dependent on a network of roadways 
and parking lots. But automobiles are even a force for change: the pollution and congestions 
they produced in the last century, led car manufacturers to invest in greener and smarter cars.  
Nowadays, even more transformative changes are on the way. The global competition is 
raising pushed by new players, like China and India, who are willing to expand their vast 
domestic markets abroad. Even the spread of the digitalization is playing a role in these 
changes, allowing new high tech companies to enter into the automotive market. 
2
 
                                                           
1
 
Source materials for the 1964 New York World’s Fair are available at nywf64.com. For a transcript of Lee Iacocca’s remarks, see “Ford 
Mustang introduced by Lee Iacocca at the 1964 World’s Fair, @Ford Online, posted on August 21, 2013, on ford.com. 
2 KPMG’s Global automotive executive Survey 2014
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Car manufacturers are examining their whole value chain with an eye toward addressing 
externalities: they are introducing new technologies, such as new interactive safety systems, 
vehicle connectivity and self-driving cars. The big automotive Brands, in order to compete 
with the new digital world, have to overstep the view of the car as a simple mechanical 
machine.  
These changes lead to an uncertain future: the importance of data over horsepower is 
transforming the basic business model and, as well the mobility systems raise of importance, 
as the meaning of owning a car seems to change. Can the soul of the car, the one that 
characterised the meaning of own a car over the last 50 years, endure? The most powerful 
tomorrow’s Automaker will be the best today’s interpreter of these uncertainties, as Ford did 
50 years ago. 
 
1.1 Global automotive industry trend 
In order to understand what is changing into the automotive industry, we should analyse the 
current market situation. I took in consideration different indicators to get a clear picture of 
the current trend. First of all, I had a look to the number of sales of new cars worldwide in
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2016 compared with the past 10 years.  
 
Image n’1. Source: National car data, Macquarie Research, January 2017 
Apparently, the automotive market is still strong. In 2016 worldwide sales reached an 
astonishing record of 88 million units, up 4.8 percent from a year earlier
3
, and profit margin 
for dealers and OEM are the highest in the last 10 years. This raise is pushed by the Chinese 
and European markets, both of which are showing positive macroeconomic trends. The 
European growth is lower compared with Chinese one- US market grows moderately and 
BRICS with Japan recorded the biggest drop. 
Globally the market, after suffering for almost 10 years, has been able to recover the drop of 
to 2008, achieving the same level of pre-crisis sales.  
If we consider the unit sold for each market, we will immediately realise that the global raise 
isn’t equally spread. 
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In fact, the strong growth is driven by one of the largest and fastest 
growing economies: China. 
                                                           
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Source: National car data, Macquarie Research, January 2017 
4 Source: National car data, Macquarie Research, January 2017
 
-3,7%
-4,1%
-0,9%
13,8%
4,5%
6,5%
4,7%
3,2%
1,8%
4,8%
0
20
40
60
80
100
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Global sales in million units and % change