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Chapter 2

The Evolution of Competition

in the Automotive Industry1

Matthias Holweg

Judge Business School, University of Cambridge

Abstract. 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.

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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).

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M. Holweg

2.1 All Competitive...