The Evolution of Competition in the Automotive Industry

At the dawn of the second automotive century it is apparent that the competitive realm of the automotive industry is shifting away from traditional classifications based on firms’ production systems or geographical homes. Companies across the regional and volume spectrum have adopted a portfolio of manufacturing concepts derived from both mass and lean production paradigms, and the recent wave of consolidation means that regional comparisons can no longer be made without considering the complexities induced by the diverse ownership structure and plethora of international collaborations. In this chapter we review these dynamics and propose a double helix model illustrating how the basis of competition has shifted from cost-leadership during the heyday of Ford’s original mass production, to variety and choice following Sloan’s portfolio strategy, to diversification through leadership in design, technology or manufacturing excellence, as in the case of Toyota, and to mass customisation, which marks the current competitive frontier. We will explore how the production paradigms that have determined much of the competition in the first automotive century have evolved, what trends shape the industry today, and what it will take to succeed in the automotive industry of the future. 1 This chapter provides a summary of research conducted as part of the ILIPT Integrated Project and the MIT International Motor Vehicle Program (IMVP), and expands on earlier works, including the book The second century: reconnecting customer and value chain through build-toorder (Holweg and Pil 2004) and the paper Beyond mass and lean production: on the dynamics of competition in the automotive industry (Économies et Sociétés: Série K: Économie de l’Enterprise, 2005, 15:245–270).