Electric and Hybrid Drive Systems Markets Analysis

According to Al-Alawi and Bradley (2013, p. 201), understanding the market is always the first step when developing a new product in the current competitive market. The times when firms manufactured products without understanding the needs of the consumers are long gone. The current market is very choosy because they have a number of options whenever they intend to purchase a product. It is, therefore, very important to conduct a market analysis in order understand its potential.

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Existing market size

Understanding the existing market size is very important when planning to roll out a new product in the market. According to Al-Alawi and Bradley (2013, p. 195), electric and hybrid drive systems are already available in most of the markets in the developed countries. Hybrid cars are already in use in the United States, Europe, Canada, and many other parts of the world. However, Davis, Diegel, Boundy and Moore (2014, p. 160) say that the current production of these hybrid cars is way below the market needs.

The main problem that most of the manufacturers experience is the viability of commercialising this project. Most of the manufacturers are still at the testing stage of this product, and they are still concerned of the functionality of the product. With the current stiff competition and consumer awareness, manufactures are keen on the value of the product they release to the market. According to Yuxing and Kamakura (2012, p. 521) most of them are willing to take time before releasing their product to ensure that they only deliver functional and high valued products.

This means that the existing market for electric and hybrid engine drive system is considerably huge. With a proper strategy, this firm can capitalise on this market and gain a relative advantage over the existing firms which are yet to find the best approach in their commercialisation strategy because of their high cost of production. According to the report released by MSF Technologies, their engines are more efficient, lighter, and cost less in their production as compared to the existing technologies used by other companies.

This means that their products can be priced at 20 percent less than the costs of other existing products, and the firm will still make good profits. Consequently, the market that was left out by the existing models because of the high price can be incorporated when this product is released to the market. Most of the existing firms are yet to exploit the markets in China, India, and parts of Africa. These regions have an emerging middle class people who are keen on purchasing products associated with class. With this possible reduction of price for the product, the market is immensely huge.

In some countries such as Netherlands, there have been an attempt to promote the use of bicycle as a way of protecting the environment. This is becoming common in most of the developed countries as people become sensitive about the need to conserve the environment. It is fast becoming a culture in these regions. The current market size can therefore be defined using consumer culture theory.

Löffler and Decker (2012) defines consumer culture theory as “The study of consumption choices and behaviours from a social and cultural point of view, as opposed to an economic or psychological one.” (p. 722). This theory states there is a new behavioural pattern caused by social forces that makes consumers avoid using cars. Their main motivation is the need to protect the environment from the emission of carbon gases from the cars. This means that this is a massive market that is slowly switching to an alternative product because of their social belief.

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When these consumers fail to find a good reason to use their cars, then they will not find a good reason to buy one in the first case. This new product offered by MSF Technologies meets their social needs in a unique way. The electric car does not emit the carbon gases responsible for environmental pollution. This product, therefore, is in line with their cultural beliefs, and when they will be making their purchase decisions, they will not find a justifiable reason not to buy the car. It means that currently, there is a large section of the market that is able and willing to buy this car, but only if it meets their specifications.

Projected Market Growth

Projecting the growth of the market requires an understanding of the existing market forces that may have a direct or indirect impact on the market size. This will help to explain the possible trend that the market will take in future. According to Yuxing and Kamakura (2012, p. 525), the market for Electric and Hybrid drive system has been consistently rising because of a number of reasons. Understanding each of the reasons will help in projecting the market growth. Environmentalists have been championing for the reduction in the consumption of petroleum products.

The use of petroleum products has been seen as one of the main contributors of environmental pollution. For this reason, many consumers prefer using hybrid and electric cars as a way of conserving the environment. This is a clear demonstration that the market for these products is expected to grow. Another clear indication of the possible growth of this market is the rising cost of petroleum products. Those who use gasoline powered engines are forced to pay higher prices in order to use their products every time there is an upward adjustment in gasoline prices.

These customers will be willing to switch to electric and hybrid engines in order to avoid the costs. According to Rodrigues, Maccari, Lenzi (2012, p. 142), people like using products associated with high class. Electric and hybrid cars are products of high class as they are the next generation cars. Consumers, especially those in the middle and high class will be willing to switch to the next generation cars. These facts clearly indicate that the market is projected to increase tremendously in the near future.

MSF Technologies can expand its market to target the emerging economies in the world. China is home to about a third of the world’s total population. The economy of this country is the fastest developing in the world among the leading economies, and it has the highest number of the middle class people in the world. This country is a potential market that should be considered when projecting the growth of the market. According to Löffler and Decker (2012, p. 721), China is currently ranked the leading country in emission of greenhouse gases. The country has felt the impact of this pollution in various ways. Mists and fogs are common in major cities such as Shanghai and Beijing.

There are cases when the air in these cities becomes so polluted that children and the elderly are forced to stay indoors. Members of the society are concerned of these issues, and they will gladly accept to participate in any small ways to reduce the rate of pollution. The hybrid and electric cars offer them opportunity to reduce the rate of carbon emission into their atmosphere. This can be argued using cognitive theory. This theory is always used to explain the mental processes that take place when making purchasing decisions. It explains how consumers will be convinced about this product once they are made to believe that it will meet their needs.

Market profitability

According to Colovic and Mayrhofer (2011, p. 1490), many firms have been struggling with the issue of profitability of their products in the market. Consumers are willing to pay less because they have several options from which they can choose. On the other hand, firms are forced to pay higher prices for the raw materials, especially the rare earth materials, because of the increased demand for the products in the global market. This means that these manufacturers find themselves under immense pressure as they struggle to maintain profitability in their operations. These firms must be conscious of the fact that they can only remain operational if they make profits in the market.

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When a firm finds itself under such challenges, the only solution may come from the efficiency in its supply chain that may help it cut the cost of operations. There are some unique advantages that this firm has over other existing competitors. Löffler and Decker (2012) state that “The technology that has been developed and proven within MSF Technologies, operates 30% more efficiently, is 30% lighter, has a manufacturing cost of 20% less than conventional cars, and removes the risk created when using rare earth materials from the global supply chain.” (p. 720). These unique characteristics give it an opportunity to increase its profitability in the market in a number of ways.

It is stated that this technology operates 30% more efficiently than their equivalents in the market. According to Löffler and Decker (2012, p. 722), consumers always desire efficiency when buying engines. They want engines that will cost less to run and maintain, and are less problematic. This is what MSF Technologies offer in their new products. The engines are simply to use and give the consumers maximum value out of their purchase. With these features, consumers will be willing to pay more for these products. The firm can demand for little higher prices for its products because of the improved efficiency over other existing models. This will increase the profit margin for the company.

In addition, the engine is lighter, which makes it more desirable among consumers. It means that the car has an increased capacity to sustain more weight than other conventional cars. The light weight makes it easy to maintain the engine, especially when it comes to its removal. Finally, the statement clearly states that the technology cuts the production costs by 20 percent. This means that the profit margin will be increased. With its current improved qualities, if the firm decides to sell the product at existing market prices, then it shall improve its profit margin by 20%. This means that this technology will increase the profitability of the firm in the market.

References

Al-Alawi, B & Bradley, T 2013, Review of hybrid, plug-in hybrid, and electric vehicle market modelling Studies, Renewable and Sustainable Energy Reviews, vol. 21, no. 13, pp. 190–203.

Colovic, A & Mayrhofer, U 2011, Optimising the Location of R&D and Production Activities: Trends in the Automotive Industry, European Planning Studies, vol. 19, no. 8, pp. 1481-1496.

Davis, S, Diegel, S, Boundy, R & Moore, S 2014, 2013 Vehicle Technologies Market Report, Oak Ridge National Laboratory, vol. 58, no. 1, pp. 1-162.

Löffler, M & Decker, R 2012, Realising opportunities in the premium automotive market via context-oriented new product positioning, Journal of Marketing Management, vol. 28, no. 5, pp. 716–732.

Rodrigues, L, Maccari, E, Lenzi, F 2012, Innovation Strategy for Business to Business Market Penetration, International Business Research, vol. 5, no. 2, pp. 137-147.

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Yuxing, R & Kamakura, W 2012, Quantitative Trend-spotting, Journal of Marketing Research, vol. 49, no. 22, pp. 514–536.

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StudyCorgi. (2021, January 7). Electric and Hybrid Drive Systems Markets Analysis. Retrieved from https://studycorgi.com/electric-and-hybrid-drive-systems-markets-analysis/

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