BUS225_Project_One

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1 Project One: Executive Summary Laine Arguelles Southern New Hampshire University BUS 225: Critical Business Skills for Success LaShana Butler January 26, 2024

2 Project One: Executive Summary Problem Diversification is a crucial aspect for automobile manufacturing companies to mitigate risks and expand their growth potential, according to a recent study. Diversification not only helps to reduce the probability of an industry collapse but also enhances a company's profitability and image. It can also give a company a competitive edge, enable it to pivot during economic uncertainty, and make use of excess cash flows (MANTEC, 2021). Based on Jozkowski's research, the automotive manufacturing industry has been affected by various external factors, such as a decrease of 4.3% in consumer confidence, a 2.5% decrease in annual growth revenue, a 4.8% decrease in annual profit, and a nearly 2% drop in annual business growth (Jozkowski, 2024). The industry has also faced challenges and trends in the past five years, including the pandemic, new regulations, worker strikes, supply chain disruptions, and external competition (Jozkowski, 2024). These factors, combined with low business sentiment and lockdown restrictions, have discouraged consumers from purchasing new vehicles and traveling. New vehicle trends are beginning to emerge on the competitive automotive market. Research shows battery manufacturers have become significant competitors, and the popularity of electric vehicles (EVs) and increasingly strict emissions regulations will drive manufacturers to innovate competitive products (Jozkowski, 2024). To gain a better understanding of the forecasted trajectory of both industries, data from surveys, spreadsheets, statistical reports, and consumer reviews will be used. Automotive Manufacturing Industry According to IBISworld, the industry has medium levels of capital intensity, technology change, regulation, and revenue unpredictability. Environmental regulations, free trade agreements, supply chain disruptions, fuel efficiency standards, and electric vehicle competition all impact the industry (Jozkowski, 2024). Based on data from the IBISWorld performance outlook, the industry lifecycle is in decline (Jozkowski, 2024, p.15). The total value of the industry, including all product and service segments, is $39.4 billion (Jozkowski, 2024, p.18). Although revenue for automobile engine and parts manufacturers decreased at an expected compound annual growth rate of 2.5% to $39.4 billion during the current period, there was a 1.1% increase in 2024, and profit recovered to 4.7% (Jozkowski, 2024, p.10). The level of volatility is determined by averaging the absolute change in revenue over the past five years. Jozkowski's report outlines four levels of volatility: very high, high, moderate, and low, based on the percentage of change. The level of technology change is high new engines remain the largest source of revenue despite fewer new car sales (Jozkowski, 2024, pg. 44) Jozkowski explains that very high is more than ±20%, high volatility is ±10% to ±20%, moderate volatility is ±3% to ±10%, and low volatility is less than ±3% (Jozkowski, 2024, p.53).

3 The US automotive industry can be divided into regions based on demographics. The southeast has the largest population, followed by the coast closest to Mexico's ports contributing to trade, then the great lakes, such as MI, which have historically contributed the most to production and have the closest access to Canada's ports. Last is the West, which provides the most population and adds 14.1% of revenue to the industry for a strong labor force of 75 establishments and access to our Mexico ports and also coastal access to Asia (Jozkowski, 2024, p.21-24). The industry has medium levels of capital intensity, technology change, regulation, and revenue unpredictability. Factors like environmental regulations, free trade agreements, supply chain disruptions, fuel efficiency standards, and electric vehicle competition all impact the industry (Jozkowski, 2024, pg. 44). All regions within the US show a clear decline of establishment growth rates based on market research, as shown on pages 22-23 of Jozkowski's report (2024). Vertically integrated automobile manufacturers hold a significant market share in the automobile industry. Honda, Ford, Toyota, and GM are some of the dominant players in automobile manufacturing and engine and parts markets (Jozkowski, 2024, pg. 30,31). A few of the top competitors in the industry are focusing on increasing profits by embracing sustainability efforts and innovative for our environmental needs. IBISworld shows in comparing the competition in terms of market share and annual growth, Ford's SUV sales are down by 25.5%, and the company has the lowest market share among the top competitors, with a 39.35% share and only 0.2% annual growth. Ford is lagging behind in the electric vehicle industry since it has not committed to a strong push into this area. On the other hand, Honda has remained strong by producing new technology and staying ahead of trends in sustainability efforts, with a market share of 17.21% and 4.8% annual growth. Similarly, Toyota has joined Honda in a sustainability push for light-duty motor vehicles, with a market share of 10.52% and 0.5% annual growth. GM has pledged to stop producing gasoline and diesel light-duty cars and SUVs by 2035 and become carbon-neutral by 2040 (Jozkowski, 2024, pg. 40). Comparatively qualitative research shows if you look at Motor Trends own research the article provides information on the sales of new cars, trucks, and SUVs in the United States in 2023, which reached a total of 15.5 million, representing a 12% increase from the previous year (MacKenzie, 2024). However, the figure remained below the historical average. According to research on the top four auto producers, Ford maintained its position as the leading brand. Motortrends research revealed that SUVs were the most popular, accounting for over 12.3 million sales. Additionally, electric vehicles, particularly Tesla's Model Y and Model 3, were the fourth and sixth best-selling vehicles respectively in 2023 (MacKenzie, 2024). The data combined suggests that the market still favors SUVs, but consumers prefer more efficient and lightweight models for better fuel consumption, or alternatively, electric vehicles. The ongoing pandemic and the Russian incursion into Ukraine have led to a notable rise in input expenses and extended interruptions in the worldwide supply chain. These external factors have resulted in reduced demand for engine components. The sector has minimal

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4 government backing and is heavily reliant on trade organizations for advocacy and market analysis, as noted by Jozkowski on pages 12 and 29 (Jozkowski, 2024). According to research we can clearly see a few market trends that will affect the automotive industry. With the increasing popularity of electric vehicles, the market is driven by factors such as rising fuel prices, government incentives, technological advancements, consumer preferences, and environmental concerns, which will push for diversification into hybrid electric automobile production (Marketline, 2019). In 2027, the United States hybrid and electric cars market is forecast to have a value of $366,282.2 million, an increase of 302.6% since 2022 (Marketline, 2023, pg 2,16). The United States hybrid and electric cars market grew by 20.7% in 2022 to reach a volume of 1,775,589 units. Hybrid is the largest segment of the hybrid and electric cars market in the United States, accounting for 56.7% of the market's total value (Marketline, 2023, pg. 2). Different sub-segments within the market, such as standard non-plug- in hybrids (HEVs), plug-in hybrids (PHEVs), extended range electric vehicles (EREVs) and battery all-electric vehicles (BEVs), which are further split into different size-segments (sub-compact, compact, mid-size, full-size, SUVs etc.), shape competition and players’ strategies (Marketline, 2019). Marketline research shows that having a strong brand and reputation is crucial in the automotive manufacturing industry, making it difficult for new players to enter the market. Tesla Motors is an exception to this trend. New companies may be encouraged to join by the help of incentives to offset investments. The increasing concern for climate change issues among consumers also drives this trend. Governments may incentivize the purchase of environmentally friendly cars through tax credits and rebate programs. For example, the US government offers a clean vehicle tax credit of up to $7,500 for new electric vehicles purchased in 2022 or before, under the Internal Revenue Code Section 30D (Marketline, 2019, pg.23). Our findings reveal that the leading automotive companies are setting a high bar in the industry through the introduction of innovative products. As outlined in Marketline's report, Toyota has recently announced that it will be releasing 10 new battery-electric car models by 2026, and has already launched the Flexi-Fuel Strong Hybrid Electric Vehicle. Similarly, Ford has unveiled a new electric SUV, while General Motors has opened Canada's first full-scale electric vehicle facility and plans to introduce 15 new models in China by 2025. It is also worth noting that Tesla has taken advantage of tax breaks and subsidies in Thailand to introduce two new EV models (Marketline, 2019, pg. 29). New Industry Our findings reveal that the leading automotive companies are setting a high bar in the industry through the introduction of innovative products. As outlined in Marketline's report it is a high concentration of competition with major players. As Marketline shows Toyota has recently announced that it will be releasing 10 new battery-electric car models by 2026, and has already launched the Flexi-Fuel Strong Hybrid Electric Vehicle. Similarly, Ford has unveiled a new electric SUV, while General Motors has opened Canada's first full-scale electric vehicle facility and plans to introduce 15 new models in China by 2025. It is also worth noting that Tesla has

5 taken advantage of tax breaks and subsidies in Thailand to introduce two new EV models (Marketline, 2019, pg. 29). The US market for hybrid and electric cars saw a robust growth of 26.8% in 2022, with a total value of $91 billion and a volume of 1.8 million units (Marketline, 2023, pp. 2, 11). In 2022, the hybrid segment accounted for 56.7% of the market's value, while the electric segment made up for the remaining 43.3% (Marketline, 2023, p. 2). Based on a report by Statista, the electric vehicle (EV) market in the United States set new records in 2022, with just under 918,500 sales of light electric vehicles. Among the top-selling electric vehicles in the U.S. market is the sedan. (FACT.MR, 2023). New technology and staying on top of market trends and consumer demands are of high importance in the automotive industry. The automotive industry places high importance on new technology and staying up-to-date with market trends and consumer demands. Corporate restructuring remains prevalent throughout the supply chain as companies try to position themselves for emerging technologies, segments, and geographies. Vehicle manufacturers are aware of the need for scale economies and cost savings when developing expensive new technologies (Marketline, 2023, p. 26). A new development in electric vehicles is the use of "solid state" batteries. As the name suggests, solid-state batteries replace the liquid electrolyte with a solid material (pg.13). The demand for advanced batteries is growing due to the increasing demand for electric vehicles. The number of electric vehicles on the world’s roads is expected to rise from three million to 300 million by 2040. This suggests that EVs will account for over 15% of new passenger vehicle registrations by 2030, up from barely 1% in 2017 (Marketline, 2023, p. 14). According to Marketline, "Batteries account for around 50% of the cost of battery electric vehicles" (2023, p. 14). The demand for smaller, more powerful batteries that last longer than their predecessors is growing, and there’s been a renewed interest in the potential benefits that solid-state batteries could bring (Marketline, 2023, p. 12). Customers are showing demand for this new technology for safety and efficiency. Energy density is the key issue that manufacturers must address to produce electric cars with ranges that are acceptable to ICE vehicle owners looking to switch. Moreover, solid electrolytes react with less volatility than liquid ones when exposed to air, meaning solid-state batteries can be cut, pierced, exposed to high temperatures or generally damaged in other ways without any risk of fire (Marketline, 2023, p. 13). Over the next few years, the industry of electric and hybrid cars is expected to continue its growth. As per a report by McKinsey & Company, the global EV market is anticipated to grow at a compound annual growth rate (CAGR) of 29% from 2020 to 2025. The report further predicts that by 2025, EVs will account for 10% of new car sales globally ( Exploring Consumer Sentiment on Electric-Vehicle Charging | McKinsey , n.d.) Porter’s Five Forces Analysis of the New and Automotive Industry

6 New Industry Automotive Manufacturing Industry Rivalry among existing competitors Electric and hybrid car manufacturers tend to remain diversified by producing a variety of vehicles in different segments. For instance, Tesla Motors differentiates itself from its competitors as it solely manufactures electric vehicles, giving it an edge in innovation compared to its rivals (Marketline, 2023, p. 26). This differentiation creates less competition in the market as there are various sub- segments within it, such as BEVs, PHEVs, EREVs, and HEVs. Additionally, these segments can be further categorized into saloons, hatchbacks, SUVs, and other vehicle types (Marketline, 2023, p. 26). If our segment specialized in "Solid State" battery production our competition would stay less. The market is characterized by high concentration and low rivalry, with a few dominant players such as General Motors, Toyota, Honda, and Ford. Ford encompasses 39.35% of the market shares, Honda stands at 17.21%, Toyota is at 10.52%, and GM is 9.54% (Marketline, 2019, p. 31). In the highly competitive automotive industry, manufacturers strive to captivate consumers with distinctive and appealing products. To achieve this, they harness cutting-edge design, technology, performance, and brand recognition. While some companies may resort to lowering prices to increase market share, others opt for diversification to stay ahead of the curve. For instance, General Motors and Ford are directing their attention towards emerging battery and self-driving vehicle enterprises, with the goal of exclusively offering electric vehicles by 2035. Based on current trends, Hyundai/Kia and Ford are the frontrunners poised to secure a strong foothold in the automotive market. (Marketline, 2023, p. 29) Threats of new entrants to the market There are a few barriers in entering this new market. Barriers to Entry in this industry are High and the trend is Steady (Jozkowski, 2024, p.28) The United States-Mexico- Canada Agreement (USMCA) ensures minimal trade barriers between these neighbors (Jozkowski, 2024,p. 48) Marketline The automotive manufacturing industry is highly competitive and regulated. Entering this industry requires significant capital and expertise, especially after supply chain disruptions, with many barriers for new companies. These barriers include high costs, legal obstacles such as emission standards, and a

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7 states that increasingly high operating costs and exit barriers in the market induce fierce competition to obtain valuable market share in a rapidly growing market (Marketline, 2023, p. 26) Research states that the level of industry assistance is Low and the trend is Increasing. Manufacturers join various organizations that lobby for legislation that benefits manufacturers, provide market research and produce industry- relevant publications. The efforts of these associations help ensure that manufacturers can remain profitable and contribute to the larger economy. These associations also help broker relationships between manufacturers for mutual benefit. Legally the Energy and Conservation Act and its amendment, the Energy Independence and Security Act, dictate emissions standards. The Environmental Protection Agency (EPA) ensures that these standards are followed. The Corporate Average Fuel Economy (CAFE) standards are set by the National Highway and Safety Administration (NHTSA) and provide further guidelines for engine production (Jozkowski, 2024, p. 48). Fuel efficiency and price remain primary concerns for manufacturers. Electric and hybrid vehicles are more sustainable but have shorter driving distances and carry upfront higher costs. Conventional gas vehicles remain popular. Most lack of differentiation from existing products. Supplying engines to the automotive manufacturing industry is a difficult task for new companies, as conventional car manufacturing is capital and energy-intensive and most vertical companies tend to already have large production contracts. As a result, major auto manufacturers produce similar vehicles at high volumes, limiting customization and acting as a barrier to entry for new companies. New companies also face many regulations and legal barriers when starting to supply engines to the automotive manufacturing industry. It can be expensive to gain the necessary expertise to produce goods or provide services for the market. Therefore, it is essential to consider the number of companies ready to enter the automotive industry (Marketline, 2019) .

8 consumers already have a car and remain hesitant to switch to new fuel sources (Jozkowski, 2024). Bargaining power of suppliers According to research, the electric and hybrid automobile production industry is characterized by a high bargaining power held by suppliers, as revealed by research (Marketline, 2023, p. 21). The suppliers in the automotive industry are instrumental in determining costs and pricing, and their dominance by a few major players translates to the ability to negotiate prices and impact the profitability of manufacturers. In the EV industry, single-source suppliers present potential vulnerabilities to the various entities, as they may be susceptible to component changes and delivery failures. These failures may disrupt production patterns and compel companies to incur costs in their quest to procure replacement components and alternative suppliers. ( The Impact of Porter’s Five Forces on the Automotive Industry , n.d.) Manufacturers are highly globalized, benefiting from international supply chains and global demand (Marketline, 2019, p. 10). Successful companies have extensive links with a wide range of globalized suppliers to limit supply chain volatility and reduce costs. Steel is a primary component in automobile engines and parts (Marketline, 2019, p. 26). Higher steel prices incur greater purchasing costs for manufacturers, pressuring profit. However, companies often pass higher input costs onto buyers (Marketline, 2019, p. 12). Climbing interest rates have threatened automotive supply chains since the pandemic and war with Russia and Ukraine. According to Investopedia the car-making industry uses tons of raw materials from all over the world. These include steel, rubber, plastics, and aluminum – the most common ones. It's no surprise that this industry uses more raw materials than any other. According to Investopedia, the number of suppliers for each raw material can differ depending on the material. In some cases, certain raw materials may only be supplied by a few specialized companies, which can result in those suppliers having a higher bargaining power. Conversely, investopedia also states that other materials may be more widely available, resulting in relatively lower

9 supplier power for those materials (Maverick, 2022). Manufacturers have increasingly turned to outsourcing to reduce costs. Companies often outsource production to cut expenses or to be nearer to suppliers and buyers. (Marketline, 2019, p. 26) Threat of substitute products Battery cell production is primarily concentrated in China, with over 70% of the global production capacity being located there. Recent research suggests that there are new products emerging in the hybrid and electric vehicle market which may pose competition to already existing ones. Our aim is to produce solid- state batteries, which would face competition from emerging hydrogen fuel cell battery technologies. ( Batteries Comparing to Hydrogen Fuel Cells - IEEE Smart Grid , n.d.). Fuel cell vehicles, which are powered by hydrogen fuel cells instead of batteries, and extended- range electric vehicles, which include a small gasoline engine to supplement the electric motor, are two examples of potential competing goods. ( Batteries Comparing to Hydrogen Fuel Cells - IEEE Smart Grid , n.d.). The costs of producing competing products may differ, with fuel cell vehicles being more expensive to produce than hybrid and electric vehicles due to the cost of hydrogen fuel cell technology. However, extended- range electric vehicles may be The automotive manufacturing industry faces a high threat of substitute products due to the presence of numerous competitors. There are various emerging products in the market that might pose a challenge to the existing ones. A report by Marketline reveals that the automotive industry is susceptible to disruption and is experiencing four disruptive trends: diverse mobility, autonomous driving, electrification, and connectivity (Marketline, 2023). Electric powertrains can be a substitute product for the automotive industry. They offer cost advantages in the long run due to their lower operating and maintenance expenses (Marketline, 2023) The automotive industry has been disrupted by new threats like Tesla, which introduced electric vehicles with unique capabilities and advantages. ( The Impact of Porter’s Five Forces on the Automotive Industry , n.d.).

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10 cheaper to produce than pure electric vehicles as they require a smaller battery. These potential rival products may have advantages over the ones currently on the market. For example, extended-range electric vehicles offer a higher driving range compared to pure electric vehicles without requiring regular recharging, while fuel cell vehicles offer longer driving ranges and quicker refuelling times than electric vehicles.( Batteries Comparing to Hydrogen Fuel Cells - IEEE Smart Grid , n.d.). Choosing between two items can be difficult, especially when it comes to demand and their performance in the market. If the rival items are more economical, effective and popular among consumers, they could pose a challenge to existing products, and potentially drive businesses off the market. To stay competitive, it is crucial for businesses in the sector to continuously study market trends and innovate their products. Bargaining power of buyers Customers are absolutely loving the new technology that's in high demand and is still new to the industry market. It is essential to understand that the electric vehicles are primarily designed for those customers who are environmentally conscious and willing to pay a premium price for a car that can reduce their carbon footprint. They believe that Buyers hold a significant amount of control over the automotive engine manufacturing purchasing power. Research conducted by "The Impact of Porter's Five Forces on the Automotive Industry" states that the demand for new and used cars has increased significantly since the pandemic slowed down travel and demand. According to IBISWorld, engine manufacturers must develop

11 choosing an electric vehicle is a responsible decision for the betterment of the environment and the future of our planet (FACT.MR, 2023). According to a report by Marketline, big players in the industry such as Tesla, Ford, Toyota, and GM are now directly selling their electric and hybrid options to customers through their dealer network. It's not just individuals who are reaping the benefits though - commercial fleets and government services are also making the switch to these eco- friendly options. (Marketline, 2023,p.34). The hybrid and electric car market in the United States is experiencing considerable expansion, and this can be attributed to several factors. These include the increase in affordability for customers, wider range of offerings, government incentives, and expanding infrastructure. Notably, the net household disposable income in the US increased by 5.9% from 2021, reaching an impressive $18.3 trillion. This indicates that consumers have the ability to make purchases at current prices. Furthermore, macroeconomic factors such as a rising GDP, increasing consumer confidence, and growing disposable income also influence the growth of this market. With the consumer confidence index currently at 71.2 and a real GDP annual growth rate of 2.1% in 2022, the market is new technologies to maintain market share due to consumer demand and regulatory pressure for improved gasoline engine designs. Expensive vehicles and engine repairs lead to consumers avoiding purchases in times of low income and confidence. Rising income levels prioritize innovative automotive designs. The COVID-19 pandemic caused a decline in car sales and travel, which in turn, resulted in a decrease in the need for car repairs. However, as restrictions lifted and people started traveling again, the demand for new and used cars stabilized. This led to an increase in demand for engines and car parts. Despite supply chain disruptions, car manufacturers managed to pass on the rising costs to buyers. (Jozkowski, 2024)p. 28). The pandemic led to more people buying used cars or making repairs, causing a shortage of supply. The market is now catching up to the demand. According to a recent report by the Department of Energy, automakers produced 13.72 million vehicles in the United States in 2020, which is a stark contrast to the 10 units produced after the pandemic in 2023. ( 2023 State of American Auto Manufacturing Report - AllAmerican.org , 2023). Another aspect buyers have control over is today's car buyers are increasingly focused on sustainability, fuel efficiency, and advanced technology. ( The Impact of Porter’s Five Forces on the Automotive Industry , n.d.). With the Russian/Ukrainian war so close to the pandemic, consumers began to

12 further supported by government incentives promoting the adoption of eco-friendly vehicles. Several companies and nonprofits, including Blink Charging, the National Automobile Dealers Association, Pacific Gas & Electric, Uber, and Zipcar, are also committed to expanding EV fleets, increasing consumer education, and improving charging availability. These advancements, coupled with rising fuel prices, incentivize eco- friendly vehicle adoption for cost savings, fostering market growth. (Marketline, 2023, p. 10) see the need for a more sustainable option with automobiles for better fuel economy. Based on research, customers have the ability to influence their competitors by making purchasing decisions and demanding added value, which gives them an advantage. This force of customer bargaining power drives companies to continuously enhance their offerings, attracting customers through a combination of affordability and quality. ( The Impact of Porter’s Five Forces on the Automotive Industry , n.d.). Comparison of the Industries Both the automotive engine production industry and the hybrid/electric manufacturing industry have similarities and differences. They both experience a high rivalry among existing competitors and a medium threat of substitute products. Due to new and current industry players, both industries are experiencing regular growth, which fuels competition between companies. However, the threat of substitutes is higher in the automotive engine production industry than in the hybrid/electric manufacturing industry. The automotive manufacturing industry has an established long history of established imports and exports, and it is easier to mass-produce and copy the products. On the other hand, the hybrid/electric manufacturing industry has a high threat of substitutes, but there are many companies with enough start-up to support a new technological industry, including new plants, suppliers, and resources. The threat of cars with gas engines or public transportation that already exist as an option is also a factor. The automotive manufacturing industry considers electric cars a threat, while the hybrid and electric manufacturing industry considers new state of the art battery technology, such as solid- state, a threat as technology continues to advance. Since the electric manufacturing industry is still new, there is a threat of new companies entering the market. However, the high costs associated with entering the electric vehicle market can deter possible competitors. The automotive industry has a low threat of new entrants due to the numerous established players within the industry. There are also numerous costs, regulations, laws, and barriers that make it difficult to enter the market. Both industries are more controlled by their suppliers but for opposite reasons. The electric manufacturing industry is highly controlled due to the lack of suppliers for the required

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13 materials. The automotive manufacturing industry doesn't have a lack of suppliers but supply chain issues and frequent worker strikes controlling imports and exports. Both are limited regarding buyer power but only for slightly different reasons. The electric vehicle manufacturing industry isn't near big enough for buyers to influence the price of vehicles. While the automotive manufacturing industry may have a significantly larger amount of buyers, they still aren't powerful enough to have a significant effect on the price of vehicles either due to dealerships and contracts, overstock, and understock. Ultimately, the differences between these industries are primarily due to the hybrid/electric manufacturing industry still being new. The larger players that have been mass-producing automobile engines for over a hundred years or more continue to find ways to compete and innovate. Summary of Findings The process of diversification into a new industry can offer a promising opportunity for businesses to augment our revenue streams by accessing untapped markets and expanding their customer base. As we can clearly see from research the automotive industry is on decline and there is a need to stay ahead of the curve for diversification. For instance, a manufacturer of automotive engines could leverage its existing expertise in the automotive industry to create high-quality electric vehicles, upon diversifying into the electric vehicle market. In a bid to achieve a competitive advantage and bolster its market share, an organization may consider diversification as a strategic option. However, our company must undertake a comprehensive evaluation of the potential benefits and risks of diversification before making any strategic decisions. This research highlights the importance of a thorough assessment to ensure that the company can gain a competitive edge and increase its revenue streams with low to medium risk. Ultimately, careful consideration and analysis of the potential advantages and disadvantages of diversification can help an organization make informed strategic decisions. As per a recent IBISWorld report, the U.S. hybrid and electric vehicle manufacturing industry is expected to witness a remarkable annualized growth rate of 8.7% and achieve a market size of $11.4 billion by 2029. Contributing factors to this expansion include the surging demand for fuel-efficient automobiles, governmental incentives, and the declining costs of batteries. (Jozkowski, 2024). Given the shift in the market with sustainable environmental friendly solutions on demand, seizing this opportunity, such as Tesla, new companies can establish themselves as key players in the industry, with advantages such as first-mover advantage and a strong reputation for innovation. The evidence suggests that this is an opportune time to enter the industry, and companies that act soon are likely to reap significant rewards.

14 Porter’s Five Forces Analysis Chart—New Industry Rivalry among existing competitors High due to large leading manufacturers of sales of hybrid & electric cars in the US are Toyota, General Threat of new entrants Low due to high cost to start unless subsidized by the government, coupled with various emission standards and compliance (Marketline, 2023, Threat of substitute products Strong threat due to substitutes in transportation like traditional fuel-based options and public transportation. (Marketline, 2023, p. 25). Bargaining power of buyers Moderate buyer power since the higher price of hybrids is the main barrier and rising fuel makes them attractive (Marketline, 2023, p. 19). Bargaining power of suppliers Medium due to outsourced components, rather than being manufactured in-house and low availability of suppliers of these products (Marketline, 2023, p.

15 Porter’s Five Forces Analysis Chart—Automotive Manufacturing Industry Rivalry among existing competitors High concentration of large engine producers (Marketline, 2019, p. 25) Threat of new entrants High due to heavy concentration, with established assembly lines, high wages, and skilled research and development (Marketline, 2019, Threat of substitute products Medium, if manufacturers do not fulfill the evolving need for change. Meet government regulations (Jozkowski, 2024, p. 26) Bargaining power of buyers High, with consumer demands for sustainability, and dealers who can overstock or understock. Bargaining power of suppliers High, caused from high level of imported parts, price of steel, and worker strikes. (Jozkowski, 2024, p. 11;17)

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16 References 2023 State of American Auto Manufacturing Report - AllAmerican.org . (2023, June 15). Allamerican.org. https://allamerican.org/research/auto-manufacturing-report/#:~:text=Automobile %20manufacturing%20is%20a%20big%20industry%20in%20the Batteries Comparing to Hydrogen Fuel Cells - IEEE Smart Grid . (n.d.). Smartgrid.ieee.org. https://smartgrid.ieee.org/bulletins/february-2023/batteries-comparing-to-hydrogen- fuel-cells Exploring consumer sentiment on electric-vehicle charging | McKinsey . (n.d.). Www.mckinsey.com. https://www.mckinsey.com/industries/automotive-and- assembly/our-insights/exploring-consumer-sentiment-on-electric-vehicle-charging FACT.MR. (2023, March 14). Demand for U.S. Hybrid Electric Vehicles Is Expected To Progress at a CAGR of 13.8% to Reach US$ 55.5 Billion by 2032 | States Fact.MR . GlobeNewswire News Room. https://www.globenewswire.com/news-release/2023/03/14/2626838/0/en/Demand- for-U-S-Hybrid-Electric-Vehicles-Is-Expected-To-Progress-at-a-CAGR-of-13-8-to-Reach- US-55-5-Billion-by-2032-States-Fact-MR.html IBISWorld. (2023, January 24). Using Porter’s Five Forces to Develop Business Strategies . Industry Insider | IBISWorld. https://www.ibisworld.com/blog/using-porter-s-five- forces-to-develop-business-strategies/99/1127/

17 Jozkowski, E. (2024, January). Automobile Engine & Parts Manufacturing in the US . Www.ibisworld.com. https://www.ibisworld.com/united-states/market-research- reports/automobile-engine-parts-manufacturing-industry/ MacKenzie, A. (2024, January 11). Lessons From 2023’s Best-Selling New Cars, Trucks, and SUVs in America . MotorTrend; MotorTrend. https://www.motortrend.com/news/best-selling- cars-trucks-suvs-in-america-2023/ MANTEC. (2021, December 14). Why Market Diversification Is Important in Manufacturing . Mantec. https://mantec.org/why-market-diversification-important/ Marketline. (2019). Automotive Industry Themes Autonomy, shared mobility, solid state batteries, vehicle light weighting and M&A . ML00026-029 , 30. Marketline. https://advantage-marketline-com.ezproxy.snhu.edu/Analysis?reporttype=5906&q%5B %5D=Automobile+Engine+ %26+Parts+Manufacturing+in+the+US&IsSearchApi=true&exactword=1 Marketline. (2023, September). Hybrid & Electric Cars in the United States . Marketline. https://www.marketline.com Maverick, J. B. (2022, January 20). What Raw Materials do Auto Manufacturers Use? Investopedia. https://www.investopedia.com/ask/answers/062315/what-types-raw- materials-would-be-used-auto-manufacturer.asp Palmen, N. (2021). New business models needed for fast-changing auto industry. Automotive Industries, 200 (1), 8. https://ezproxy.snhu.edu/login?qurl=https%3A%2F

18 %2Fwww.proquest.com%2Ftrade-journals%2Fnew-business-models-needed-fast- changing-auto%2Fdocview%2F2578205900%2Fse-2%3Faccountid%3D3783 The Impact of Porter’s Five Forces on the Automotive Industry . (n.d.). Parkplus.io. https://parkplus.io/car-news/the-impact-of-porter-five-forces-on-the-automotive- industry Weykamp, G. (2024). Ford Super Duty, Toyota Prius, Kia EV9 win ’24 NACTOY awards. Automotive News , 98 (7124), 28

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