Market analysis and positioning in the automotive industry

Electric car connected to the charging station

In this article we look at how market analysis enables effective positioning strategies that make companies win against their competitors.

Focusing on Business means increasing the value of your Brand and improving the Business of your Company or Activity.

“Selling everything to everyone is not the right strategy.”

This is my mantra and I think I have written it dozens of times in these blog pages. Let’s find out together why.

The logic of large numbers leads us to think that if I offer my product or service, to the greatest number of people, I am more likely to sell.

Unfortunately or fortunately, this is not the case.

Each person has his or her own needs, characteristics, budget.

Every person wants to be a protagonist in his or her own life. He wants to feel like the center of attention, especially when we talk about sales.

He doesn’t want to feel like he is being taken for a ride. He wants that, what we are going to sell him, is exactly the product he needs.

Therefore, it is important to analyze consumer behavior.

Simple to say, but difficult to apply.
Especially when a vendor, or a company, needs to make ends meet at the end of the month.

So the temptation to sell everything to anyone prevails. We probably achieve the revenue goal in the short run. In the long run this strategy does not pay off.

Let’s analyze the auto market together to see how the focus strategy can help your business.

Automotive market analysis

Now let’s look at an auto industry market analysis over the past 50 years and find out together why it is essential to collect data and gather useful information to periodically perform an analysis of the competition in your market.

Not surprisingly, I chose the automotive sector. One of the most competitive globally in terms of number of companies and market size.

Where companies invest billions of dollars in research and development. Not to mention production, sales networks, after-sales service, marketing, advertising and market research.

In order to write this article, I tried to conduct an online search, to get some hard data.

I found this very interesting article from Quattroruote “Sales rankings in Italy from 1967 to the present.“.

The article is dated January 30, 2012, but it matters little.

What I am interested in is the underlying concept. The starting point for implementing a focus strategy.

If, like yours truly, you love numbers and statistics, please consider the concept and not the mathematical model. Clearly the data I obtained not only absolutely real.

Segmentation of the auto market in 1967

In 1967 the car market in Italy was 1,357,000 vehicles. 87.8 percent were in the hands of Italian manufacturers and the remaining 12.2 percent were in the hands of foreign manufacturers.

The best-selling foreigner in Italy was the Prinz? followed by Simca. Two long defunct brands.

Curious note. I don’t know if it was just “in my neck of the woods,” but people used to joke that Prinz was bad luck. When you saw a Prinz you would touch the arm of the nearest friend saying “prinz yours”….🤪

My father had a Simca…. understand why the brand died out….😂

Aside from these digressions, I honestly did not check exactly how many brands existed in the Italian market, but there were only about ten.

And each brand had 4 to 5 models, all exclusively gasoline-powered.

Doing the math roughly, we could say that dividing the total number of cars (1,357,000) by 10 manufacturers and 5 models, on average each model sold about 27,000 cars.

Segmentation of the auto market in 2007

I invite you to read the charts from 1967 to 2007 are really interesting.

I skip almost the entire ranking to get to the year 2007, remembered as having record sales in Italy with 2,490,570 registered cars.

Market segmentation has changed significantly with Italian “reduced” to 31.3% and foreign to 68.7%.

The research here reports only the top ten best-selling brands, but you only need to do an online search to see that the brands distributed in Italy are definitely more.

Not only that. Compared to 1967, the engines have also changed. In 2007, a person could buy a car by choosing from 4 different power supplies: gasoline, diesel, LPG, and CNG.

Again I do the math in spans…. I don’t care about the actual data. The important thing is the concept.

We apply the same formula again, calculating 30 manufacturers (but it is definitely more) and 5 models on average.

Dividing the total number of cars (2,490,570) by 30 manufacturers and 5 models, on average each model sold about 16,600 cars.

I point out that the market had almost doubled since 1967, yet manufacturers were selling fewer cars on average.

Taking this analysis to the extreme and dividing the sales per single model 16,600 by fuel type (4), we get 4,150 cars per model type and fuel type.

Segmentation of the auto market in 2018

We come to the present day. The auto market has drastically changed. The contraction is no longer only at the national level but is global.

Not only that. In the past 10 years, several automakers have grouped together through functions, acquisitions, partnerships. The auto market, the real one, is in the hands of a few large groups.

Let’s come to the numbers. 1,910,025 cars were sold. The FCA group, which incorporates basically all Italian manufacturers, accounts for a 26.2 percent share. The rest is in the hands of foreign manufacturers.

I could take Quattroruote and check how many brands are distributed in Italy. Many, many, I would say over 50. I don’t want to err on the side of excess, let’s say 40.

Compared with 2007, two essential data have changed:

The number of models offered by each automaker, definitely increased. I would have to check all the houses but let’s say we go from 5 to 6.
In addition, the possible sources of power have expanded. In the last 2 to 3 years, electric has been very much in the news.

And here we are with calculator in hand. We divide the total number of cars (1,910,025) by 40 manufacturers, 6 models, 5 engines. On average, each model sold 1,592 cars.

Let us try to analyze the market from another point of view.

In 1967 the customer could choose from 50 models. That is, 10 Brand x 5 models x 1 motorization.

Let’s also add that there were very few engines, essential fittings with a couple of optional extras, not to mention a very small color range.

In 2018, the customer had a choice of 1,200 models. That is, 40 Brand x 6 models x 5 engines.

Not only that. Each model is offered with different engines, endless equipment and options, and the color range almost covers the Pantone scale. Crazy dare I say.

I know, if you are an analyst you are putting your hands in your hair, but remember that this is just an exercise, not a real market analysis🤪

I hope I have made the point.

I like cars and I read the news on Google News daily. You won’t believe it but soon new Brands will land in Italy offering their electric-powered solutions.

Auto Sector Focus Strategies. The winning example of SEAT Leon

Have you seen the SEAT Leon commercial? Brain. Heart. Liver.

Many times we imagine that a car is for everyone.

If you are a car manufacturer, you would like your car to be bought by everyone. But it isn’t.
Each person has totally different needs, characteristics and interests.

Thanks to the Focusing strategy, you clearly decide what your target audience is and speak exclusively to that.

Speak your own language. Just like in the SEAT Leon commercial.

In a clear, direct way, he took care of our strategy, not deciding to talk to everyone, but to target what he thinks is the ideal target audience. That is, the 30-year-old.

The commercial is even more punchy in the audio version that plays on the radio.

At 20 you have heart and guts. But you don’t have brains.
At 50 you have brains and heart. But you don’t have guts.
At 30 you have heart, brain and liver.

So the right car for you is SEAT Leon.

The message is great because it states extremely clearly to whom he wants to speak.

Not only that.

It is communicating that if you believe you are a person with heart, brain and liver there is only one car that is good for you: SEAT Leon.

The Focusing strategy tends to “hit” one target audience to the extremely clear exclusion of others.
Apparently it can be judged to be a strategy that reduces sales. Far from it.

If we are not clear in our communication, if we want to sell everything to everyone, the result we probably get is that we sell nothing to anyone.

The more generalist the product, the greater the risk of not pleasing anyone.

Not even Coca-Cola, the world’s best-known brand, has 100 percent market share.

Pepsi implemented a Focusing strategy to capture some of Coca-Cola’s market share and today is the second largest Brand globally in Cola.

Whatever product or service you dispense, you may decide to implement a focus strategy.

This allows you to win over your generalist competitors and gain market share.

Market Analysis Final Conclusions

And here we come to the final conclusions.

The spannometric analysis I have reported to you aims to take a snapshot of the auto market, which has gradually segmented over the years.

If a manufacturer wants to preside over the entire market, it has to make incredible efforts. Crazy investments in research and development. Creation of new assembly lines etc.

Large global groups are also taking the hit. In fact, new alliances are being formed, with the goal of developing critical mass to win, above all, in the electric market.

But is the market for electric cars so successful?

I personally believe not. I espoused early on the vision of the great Sergio Marchionne, who thought it was premature to enter this market segment.

Almost every automaker has wanted to enter this market, and virtually all of them are losing money on it.

Why can focus strategy help a company’s business?

The market analysis we have seen today shows how, gradually, a market tends to segment into smaller and smaller niches.

Focusing means choosing one of these niches, or creating a new one.

Tesla created the electric car niche. In this way it was the first to enter the consumer’s head.

You say to a person: electric car, 90% of the time you get Tesla.

As mentioned earlier, the crucial point, is to stay focused in that niche.

When we have saturated one market, we approach a new market, but still with the same product.

At the limit, we can modify it slightly, if need be, to localize it. That is, to adapt it to local customs and traditions.

Can the focus strategy be applied in all areas?

I can’t give a definite answer, but in principle I would venture to say yes.
It means going from generalist to specialist. That’s all.

To win in the target market, it is not important that our product or service is better than that of competitors.
It is essential that it be different.
It is critical to get into the consumer’s head first.

Want to find out how to improve the visibility and Business of your Company or Business?
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Market analysis applied to the automotive industry