The biggest hurdles for international auto manufacturers

Posted on 5 Mar 2018 by The Manufacturer

Increasingly, the word of auto manufacturing is a global affair. With essentially every developed nation offering vehicles from manufacturers in Europe, North America and Asia, consumer preferences have shifted dramatically from decades past.

Confusion Road Puzzle Challenge - image courtesy of Depositphotos.This worldwide industry continues to become more interdependent on consumers outside the manufacturers’ nations of origin.

Due to this and a variety of other factors, there are new and difficult hurdles that many manufacturers are facing in the 21st century. Namely, three primary factors are impacting manufacturers in their pursuit to increase sales, out-compete each other, and maintain consumer loyalty. Below are those three hurdles and why they present challenges for auto manufacturers.

Trade barriers

Arguably the single-biggest factor presenting challenges for international auto manufacturers, various trade restrictions and protectionist actions of late are cause for apprehension.

One prime example is Brexit, which experts have stated could lower domestic production and purchase of foreign vehicles in the UK by as much as 10%. The same effects have also been projected for British automakers, who export more than 1 million vehicles each year to mainland Europe.

Several less notable trade pacts and restrictions globally have also arisen in the past few years, presenting new challenges for manufacturers that serve a global audience rather than a national one. With even the biggest global economies like the United States and China making similar moves, manufacturers who rely on foreign purchase and production could find themselves in a less than ideal situation.

Slowing access to new markets

For decades, rapid growth in international markets was taken for granted. As more and more nations entered developed status, the need for personal transportation exploded. While this trend has continued, the nature of how these nations are responding to the challenge is changing.

Many nations already have reached the saturation point of potential new auto consumers. In many nations where development is still progressing from “developing” to “developed”, massive investments in public transportation are circumventing the need for personal vehicles.

Coupled with the fact that automobile costs have risen far faster than the general rate of inflation in most nations over the past 50 years, and a recipe for disaster emerges: most manufacturers no longer have easy access to emerging markets where they can dramatically increase sales.

Demand for pre-owned vehicles

Due to cost factors and less desire to go into debt, more people are seeking alternative ways to both drive and finance their vehicles. According to Zoomo Car Credit and other automotive research firms, the shift in preference for pre-owned vehicles over the past year is roughly 15%; new car sales have declined by around 8% and used car sales have increased by 7% at the same time.

Because manufacturing quality in the most major areas has increased markedly over the decades, vehicles are able to remain on the road longer than was historically possible. This has led to millions finding reliable and desirable pre-owned cars, thereby saving them from purchasing a new vehicle at several times the cost.

While auto manufacturers have always had struggles to overcome, there are several present today that may be difficult to circumvent. From the influence of technology on the industry to trade barriers causing a reduction in international sales, manufacturers will need to find creative solutions in the near-future in order to negate these obstacles.