Tuesday, October 23, 2007

Changing markets and changing demands in the automotive industry

A recent article [registration required] in the Wall Street Journal mentions that Nissan has been clamoring to design and manufacture a small and inexpensive car as consumers' needs and desires are changing dramatically from where they were in the past 20 years. What is interesting is how significant the shift must be for manufacturers. Just a decade ago, the premier vehicles were the exact opposite: SUVs and trucks. Consumers' tastes have flip-flopped as the new feature that they are looking for in vehicles is fuel economy and ecological friendliness. The expectation of cars costing less due to surprisingly high quality offerings from low-price manufacturers such as Hyundai and Kia are further shaking things up in the automotive world.

Trends to smaller, efficient vehicles are now the growth industry for automotive manufacturers in the United States. Alternative fuel offerings are also a potential growth industry as demonstrated by the demand for EVs(rebates are exceeding available funds) and the trend to using Biodiesel when it's possible. This is a trend that has been evident in Europe over the past decade with the success of the Smart Car, the Mini Cooper, and Vespa scooters - all companies that are currently pushing into the USA market from European markets to meet the new small vehicle demand.

It will be interesting to see how Nissan's value offering turns out as it takes advantages of its holdings in the budget design and manufacturing of sibling company Renault. Furthermore, it will be interesting to see how this affects the Nissan brand and the bottom line for Nissan's profits.