This paper presents a market analysis component of a marketing plan for Chery Automotive, a Chinese automobile manufacturer seeking entry into the American market. It identifies key target markets based on income levels and environmental preferences, examines the competitive landscape dominated by General Motors, Ford, and Daimler-Chrysler, and highlights the growing threat posed by Japanese manufacturers. The analysis evaluates market opportunities stemming from rising demand for compact, fuel-efficient, and hybrid vehicles, while acknowledging threats including entrenched competition and the potential revival of domestic American automakers. Industry classification under NAICS code 423110 and recent sales decline trends in the North American market are also discussed.
The Chinese producer Chery Automotive manufactures a wide series of automobiles that must be positioned in the market based on product features and customer demand. In the first instance, Chery automobiles will appeal to all automobile owners as well as non-owners who are interested in purchasing a car. As such, the Chinese cars will be addressed to buyers across all income levels, including those who desire a luxurious vehicle as well as those seeking a compact hybrid.
The American automobile market is a dynamic one in which new technologies are developed continuously and new features are constantly incorporated into vehicles. The major players in the American automobile market are General Motors, Ford, and Daimler-Chrysler. They sit at the heart of the American economy and industry and influence the population across numerous areas:
A less favorable characteristic of the American automobile industry is that major domestic manufacturers such as Ford and General Motors are generally focused on producing large and luxurious vehicles that consume large amounts of fuel and are relatively expensive to maintain. Meanwhile, American consumers are demanding increasingly fuel-efficient cars. This opens the door for foreign manufacturers focused on producing compact, lower-consumption vehicles. On the American market, however, Japanese manufacturers currently hold supremacy in this category. Therefore, Chery Automotive may encounter serious competition from long-established Japanese carmakers such as Toyota, Nissan, and Honda.
In order to overcome this competition and ensure the success of its operations in the United States, automobiles manufactured by Chery Automotive will have to meet several consumer demands and expectations:
Based on product characteristics, two primary target markets can be identified. The first target market consists of individuals with above-average incomes, for whom a car represents more than a means of transportation. For this segment, Chery will position vehicles in the luxury category, such as the Eastar model.
Compact and fuel-efficient vehicles will be directed toward a second target market, which can be further divided into two sub-segments. The primary sub-target market consists of individuals with medium and below-medium incomes who wish to purchase a compact car for financial reasons. The second sub-target market consists of individuals with both medium and above-average incomes who are concerned with preserving the environment and will therefore seek out fuel-efficient vehicles.
A new and largely uncharted target market can also be identified: individuals who do not currently own a car and have never owned one, due to ecological convictions. Chery Automotive can address this group by communicating the environmental benefits of its compact and fuel-efficient hybrid vehicles.
Given that Chery's vehicles will be sold in the American market, it is appropriate to consider the automobile industry from a statistical and regulatory perspective, specifically the classification system implemented by the North American Industry Classification System (NAICS). From this standpoint, Chinese cars will fall under category 423110 — Automobile and Other Motor Vehicle Merchant Wholesalers. These regulations have been in place since 2002 (Official Website of the North American Industry Classification System, 2008).
All indicators point to a contraction in the American automobile industry, manifested in a growing preference among Americans for foreign vehicles over domestic ones. This trend has been apparent in North America in recent years and is expected to continue. Both 2005 and 2006 ended with substantial decreases in sales compared to the prior year: a decline of 600,000 units in 2005 relative to 2004, and a further decline of 650,000 units in 2006 relative to 2005 (DesRosiers, 2007). Chery Automotive is not currently part of the American car market, as it has yet to enter this territory.
The market for car components is highly similar to the automobile market itself in that sales and revenues have declined and face fierce competition from Japanese manufacturers. Among the most relevant suppliers of auto components are AYD North America, Delphi, and Smart Dealer Parts.
It is difficult to identify a true substitute product for the automobile, as no other item can satisfy the same combination of needs. Consumers could theoretically use public transportation options such as airplanes, trains, or buses, or even bicycles, to meet their travel needs — but none of these offer the same level of personal security and independence that automobiles provide.
"NAICS classification and declining domestic auto sales"
"Suppliers, substitute products, opportunities, and threats"
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