Karl Benz founded the company that would one day be called Mercedes-Benz in 1883, and they sold their first automobile in 1886. At the end of the day, the government wants to see the domestic car industry succeed, but many of the Chinese companies depend on successful foreign joint ventures to contribute to their profitability and they wonʼt do anything to harm those companies, because that would ultimately harm the whole industry,” says Russo.
The industry further agglomerated—an economics term for the consolidation of an industry in one geographic area—in Detroit, and parts suppliers and skilled laborers followed the largest manufacturers to Motown, making it harder for companies in other regions to compete.
Buying a car requires a significant investment and demands the consideration of everything from technology to safety Equally as important is a manufacturer’s dependability — the last thing you want is to buy a model that will continually require repairs due to manufacturer defects.
This trend significantly reduces supplier power or the rental firms power and increases corporate buyer power since the business segment is excruciatingly price sensitive, well informed about the industrys price structure, purchase in larger quantities and they use the internet to force lower prices.
But as PPB Advisory partner Stephen Longley crunches the numbers – 150 manufacturers which supply the car makers directly and another 1000 to 2000 businesses supplying them with parts for their components – he believes there is still a role for government.