Chapter 3 - eslaMotorsandtheU.S.AutomotiveIndustry...

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esla Motors and the U.S. Automotive Industry THE BIG THREE —GM, Ford, and Chrysler—ruled the U.S. car market for most of the 20th century.  Protected by high entry barriers, highly profitable GM had over half of the U.S. market to itself. Ford and  Chrysler both did well too. Then, in the 1960s and 1970s, foreign carmakers entered the U.S. market, at  first mainly by importing vehicles from overseas plants. Foreign makes included the German brands  Volkswagen (also owner of the Porsche and Audi brands), Daimler, and BMW, and the Japanese brands  Toyota, Honda, and Nissan. By the 1980s, these foreign entrants had intensified competition and  threatened the Big Three’s market share, such that the U.S. Congress passed significant import  restrictions. Not to be stopped, the new players responded by building U.S. plants to comply with the new  rules. More recently, Korean carmakers Hyundai and Kia have begun making and selling cars in the  United States. ©  Johannes Eisele/AFP/Getty Images Although globalization paved the way for significant new entry into the U.S. auto market, the worldwide  car manufacturing industry has seen few new entrants. In fact, no new major car manufacturers have  emerged in the past couple of decades simply because few industrial products, save for jet airplanes and  nuclear power plants, are as complex to build as traditional cars powered by internal combustion engines. Large-scale production is necessary for car manufacturers to be cost-competitive. Taken together, these  factors create significant entry barriers into the car manufacturing industry. Would you say, then, that a  Silicon Valley technology startup, attempting to break into this industry, might be running a fool’s errand? Enter serial entrepreneur Elon Musk, who creates and runs new ventures to address not only economic  but also social and environmental challenges. Musk looms large in the public imagination and has even  been likened to the fictional Tony Stark, aka the Iron Man, Marvel Comics’ eccentric inventor. Indeed,  Musk made a cameo appearance in  Iron Man 2.  During the Internet boom, Musk made his fortune by  developing an early version of Google maps and by co-founding the online payment system PayPal. The  sale of both companies amounted to close to $2 billion, and Musk’s share allowed him to focus on his  lifelong passions in science, engineering, and space.
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  • Spring '13
  • Bernardes
  • Factors, Tesla Motors, Competitive Forces

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