al 2004). This dominant position was captured by Japanese manufacturers, in the later years of the 19th century, by providing more efficient and low cost cars using the ‘lean’ production systems. Over the years the car manufacturing has evolved a lot, with companies trying all means (including mergers and acquisitions) to reduce manufacturing costs and increasing efficiencies. The production bases of most manufacturers are shifting from developed economies to low cost Asian economies which are also providing them with huge customer base on account of their high economic growth. The 2009 financial crisis has further reduced demand in US and Europe. To save the industry, governments doled out huge packages and today they hold stakes in these firms. For example, US government holds 8% stake in Chrysler (sub5zero.com, 2010).
This industry is greatly impacted by the government regulations. For example, there have been a number of emission norms set by the US government to address the environment concerns. Similarly the European countries have also been passing emission norms (Euro 1, 2 and so on) which the car manufacturers have to comply with. The emerging markets have also started passing such regulations. Besides these emission norms, governments also pass mileage per gallon laws and passenger safety laws.
Car industry is highly sensitive to the economic scenario of a country or an individual. A car is seen more as a status symbol than as a requirement. Hence the consumers are likely to postpone their buying decision in case of financial crisis. A study by Frost & Sullivan (2010) shows that “in general recessions in this industry last for two to three years”. As per data trends (appendix fig. 1), the low demand resulting from the 2009 crisis will also follow similar trend. The study also shows that demand in key global markets has gone down by 14% on account of the crisis (appendix fig.4). The industry