Automotive Manufacturing Industry
The problem the company is facing is the lack of growth due to the limited sources of income. In order to ascertain other business opportunities, it is important to analyze motor demand as qualitative data and motor sales as quantitative. The company operates within the U.S. automotive manufacturing industry. Its total net worth constitutes more than 68 billion dollars (Car & automobile manufacturing industry in the US, para. 4). Over the course of the last years, car sales in the US were dominated by gasoline motors, which accounted for 97% of all sales annually (Josephs, 2017, para. 5). At the same time, hybrid motors had 2% and electric ones comprised 0,1% (Josephs, 2017, para. 5). Overall, the best investment is gasoline because neither of the other motor types have the same demand.
At this point, gas motors are the most popular product on the market, while hybrid and electric ones are chosen by few customers. As environmentally-friendly views spread, it is likely that electric motors sales will grow in the future (Josephs, 2017). The most evident trend in customer demand is growing interest in the computing power of vehicles (Singh, 2020). The second tendency is that “electrified vehicles include a large portion of hybrid electrics, which means that even beyond 2030, the internal-combustion engine will remain very relevant” (Gao et al., 2016, p. 8). According to the US care demand in 2020, sedan body type constitutes 40%, while trucks are 20%, and sport utility vehicles hold 8% of all market sales (U.S. light vehicle market in April 2019 and 2020, by segment, n.d.). In essence, the industry is unlikely to experience any radical changes, with its mainstream products retaining their market positions.
Motorcycle Industry
Another potential industry which the company can enter is motorcycles. Its most attractive feature is the sudden growth in the aftermath of the pandemic (Roberson, 2020). The reason for the surge in motorcycles’ popularity lies in their flexibility and the lower risk of virus transmission (Apiratwarakul et al., 2020). Car drivers are at greater risk because of the confined space, which is why customers sought a more safe and fast vehicle. Therefore, the customer demand is a vehicle that delivers velocity and comfort.
Motorcycle industry is a significantly smaller industry compared to cars. Its overall net worth is 6 billion dollars, which is almost ten times lower than the automotive manufacturing industry (Motorcycle, bike & parts manufacturing industry in the US, 2020). The same report states that motorcycle sales in the US constituted 5 billion dollars in 2020. Roberson (2020) reports the “rise of small-displacement but full-sized machines that appeal both to new riders, and are also tempting to experienced riders as well” (para. 10). The most trending types are Kawasaki, KTM Duke, BMW, and Yamaha. At the same time, these are the ones that will likely grow in the future, making them an attractive target for investors.
Porter’s Five Forces Analysis
The first force is competitive rivalry, which is stronger in the car market because the share of manufacturers is bigger than in the motorcycle industry. The second force is the threat of new entrants, which is low risk in both markets since the amount of costs for the effective competition can only be sustained by the producers that are already on the market. The third force is supply power, which is more favorable in the car market as the company is the supplier of engines. The fourth one is buyer power, and it is favorable in both industries as the demand is growing in both cases. Finally, the threat of substitution is low because engine construction cannot be outsourced, making it especially valuable for customers. Overall, the car industry is more stable, yet considering the growth in the motorcycle market, it will be beneficial for the company to launch the production of engines for these vehicles as well.
References
Apiratwarakul, K., Ienghong, K., Bhudhisawasdi, V., Gaysonsiri, D., & Tiamkao, S. (2020). Response times of motorcycle ambulances during the COVID-19 pandemic. Open Access Macedonian Journal of Medical Sciences, 8(T1), 526-529.
Car & automobile manufacturing industry in the US. (n.d.). IBIS World. Web.
Gao, P., Kaas, H. W., Mohr, D., & Wee, D. (2016). Disruptive trends that will transform the auto industry. McKinsey & Company, 1, 1-9.
Josephs, L. (2017). Long before the combustion engine, the hybrid car is facing obsolescence. Quartz.
Motorcycle, bike & parts manufacturing industry in the US. (2020). IBIS World.
Roberson, B. (2020). The motorcycle industry was at a crossroads, then COVID-19 changed up the map. Forbes.
Singh, S. (2020). Top 20 post-Covid automotive trends. Forbes.
U.S. light vehicle market in April 2019 and 2020, by segment. (n.d.). Statista. Web.