How Automakers Plan Their Products: A Primer for Policymakers on Automotive Industry Business PlanningDownload Now
A great deal of public discussion has focused on petroleum use and greenhouse gas emissions from automobiles. An inevitable response has been to call upon automakers to produce higher-mileage vehicles. Many policymakers have suggested regulations to spur more fuel efficient designs. But little effort has been made to explain to policymakers and the public the intricate decision-making process entailed in changing vehicle designs or adjusting product plans to meet new needs.
Understanding the process by which product planning and strategic business decisions are reached is a crucial foundation for developing sound approaches to meet the auto sector’s unique challenges related to energy use and climate change. To help understand these issues, this report reviews automotive product planning practices and synthesizes insights from a set of confidential, executive-level interviews. The interviews garnered perspectives from key individuals at companies accounting for 60% of the U.S. automotive market.
In fall 2005 and again in summer 2006, the average price of gasoline in the United States crossed the $3 per gallon mark. Some observers believe that the era of “cheap fuel” is gone forever, while others counter that there could be a return—at least temporarily—to lower prices at the pump. Whatever the uncertainty about the future oil market, high fuel prices and related issues have already impacted the new vehicle market. During 2006, sales of light trucks, including many SUVs, dropped notably. Although consumers did not rush to small cars as they did during the 1970s oil shocks, the market has shifted to models that are smaller and more fuel-efficient than in the recent past. While fuel economy has risen only slightly overall, these shifts have major competitive implications for different automakers.
How do automakers respond to a need to redesign their products, whether due to changes in consumer demand from high fuel prices and other market concerns, or due to policy changes adopted to address social concerns? That is the fundamental question addressed in this study.Download Now