The Automotive Industry In the United States Essay

The Automotive Industry In the United States - Essay Example Fundamentally, the automotive industry is a textbook example of an industry where economies of scale pay a very important role. While there may be dozens of players around the world who produce, support and work with the industry, there are only a few producers who can claim to have a significant share of the market. Similarly, even though cars are produced in almost every developing and developed nation, only a few countries contribute in a significant manner to the global car production and consumption statistics.Market ConcentrationIn the automotive industry the big three (Ford Motor Company, General Motor Corporation, Chrysler) dominate the market. Ford motor Company (Ford) and General Motor (GM) are the two world’s largest car producers with a joint market share   between 21% and 25% (Guerzoni, 2001). Market concentration of Ford and GM can be measured using a precise concentration measuring tool. The H Index is obtained by squaring the market-share of the players, and then adding up those squares. The H index for Ford and GM is 1066. This figure is a sign of moderate market concentration of the two major producers. Rivalry in the industry is measured by Concentration Ratio. Like H index, this is another measure and is expressed in the terms CRx, which stands for the percentage of the market sector controlled by the biggest x firms. For example, CR2= 46% for Ford and GM. The automotive industry produces a higher level of output in the US than any other single industry, with the rate consistently growing.