1. Reflect on the global auto industry and the U.S. market in particular. If aut
ID: 391543 • Letter: 1
Question
1. Reflect on the global auto industry and the U.S. market in particular. If automakers who do not produce in the USA are penalized, what impact will such a penalty have? Discuss your response from the perspectives of different stakeholders. 2. Swedish automaker Volvo recently announced plans to open a new plant in the United States. Comment on the strategy Volvo is following. Why is it so important to Volvo to have a presence in the United States? What does the company hope to gain from this investment? 3. Volvo's CEO says that a clear trade policy and a supportive investment climate is needed. Discuss how such a climate would attract new investments.Explanation / Answer
1. Global Auto Industry and U.S. market [Mandatory]
It is forecasted that the global sales force of the vehicles would hit 82.8 million by 2019 in the U.S. Along China, the U.S. is found to have the largest market for automobile industry both in production and sales. On an average, 25 million vehicles are sold in U.S. Market every year.
Global vehicle sales (SAARs), Q2 2018
Q2-2018
Rank
Q2-2017
Rank
% Change
Rank
Global
97,009,228
93,463,586
3.8
Asia
39,850,401
1
39,021,802
1
2.1
7
Indian sub-continent
4,616,074
4
3,830,717
5
20.5
1
Central Europe
1,447,805
7
1,320,294
8
9.6
3
East Europe
3,167,947
6
3,023,035
6
4.7
5
West Europe
16,854,234
3
16,094,751
3
4.7
5
MEA
4,135,659
5
3,886,736
4
6.4
4
U.S.
25,523,975
2
24,855,825
2
11.6
2
Other
1, 413,131
8
1,430,427
7
-1.2
8
Automaker who do not produce in the USA are penalized – Reason
1. High tariff or taxation for importing vehicles from other countries: Despite, the cost vehicle production in various countries is less compared to the U.S. The U.S. government is imposing a high amount of taxation to the vehicles imported from other countries. Henceforth, while it hits the domestic market of the U.S. the price of the imported vehicle is slightly higher or equivalent in the price of the vehicles which is domestically produced. This is done by the U.S. government to support domestic producers.
2. Supporting domestic automotive producers and fluttering foreign automotive producers: Starting a production unit requires a lot of legal mandatory work. But once the production is started the U.S. government supports the operation process in every possible way. The reason is that the company is providing employment to its citizens and providing assistance to overall economic development. If the vehicle is imported, then, it is subjected to various testing and certifications to sell the vehicles in the domestic market. Furthermore, if the vehicle is not environmental friendly the penalty would be severe.
3. Market size and import problems: As mentioned before, the U.S. is having a significant market size moreover, the import problems, government restriction, requirement of certain certification and high amount of penalty for foreign producers if not environmental friendly had collectively contributing threat to automobile companies who are not producing in the U.S. Henceforth automobile companies such as VOLVO had stated to place their production unit in the U.S. recently.
From the stakeholder viewpoint
1. Conserving and supporting domestic automobile industry for the employment of U.S. citizens and economic development: Highly Acceptable
2. Imposing laws on automobile industry keeping environment wellbeing in mind: Highly acceptable
3. Supporting domestic automobile production by understanding the demand condition through market size: Highly acceptable
4. Imposing a high amount of taxation and strict laws to protect domestic producer: Slightly Acceptable
Reason: In the current era of globalization, trade has to be liberalized and encouraged. This would help in the bondage of countries between whom the trade occurs. It encourages competition within the industry to produce better quality products at less cost. Hereby, the consumer would be greatly benefited. The living standard would increase for the very same income. Thereby, I suggest U.S. government liberalize trade policy to have better bondage with trading countries and reduce import tariff to encourage competition globally including the U.S.
2. [Not Mandatory]
3. [Not Mandatory]
Q2-2018
Rank
Q2-2017
Rank
% Change
Rank
Global
97,009,228
93,463,586
3.8
Asia
39,850,401
1
39,021,802
1
2.1
7
Indian sub-continent
4,616,074
4
3,830,717
5
20.5
1
Central Europe
1,447,805
7
1,320,294
8
9.6
3
East Europe
3,167,947
6
3,023,035
6
4.7
5
West Europe
16,854,234
3
16,094,751
3
4.7
5
MEA
4,135,659
5
3,886,736
4
6.4
4
U.S.
25,523,975
2
24,855,825
2
11.6
2
Other
1, 413,131
8
1,430,427
7
-1.2
8
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