Automotive company future marketing ideas Assignment

Automotive company future marketing ideas - Assignment Example uction of smaller and more fuel efficient vehicles as opposed to continuing with the production of bigger cars which are more profitable and make a conclusion at the end. Vehicle manufacture economics debates generally agree that sports utility vehicles and pickups are more profitable than the smaller but more efficient cars. Moving away from the traditionally profitable big vehicles segment to smaller cars is on paper not a very good idea especially with the automotive industry just recovering from a global slump. The marginal cost pricing principle states that the market price of a good equals its marginal cost which implies the gross margin accruing from every product is zero (Bernanke, 2004). The reason SUVs are priced higher and so more profitable is because companies want to meet their corporate average fuel economy (CAFÉ) targets by selling smaller cars. This enables them sell one bigger car for every small car and so they can accept lower margins of profit for small cars (Kwak, 2009). Selling smaller cars therefore would still allow for profitability if bigger cars are reduced. The other reason why the strategy is good is that small cars are bought usually by younger first time buyers and so selling them a small car cheaply will tie them to come and buy a bigger car in the future say when they are into their mid thirties of early forties. Smaller cars have a lower price and therefore are likely to have more buyers than the big more expensive cars especially for first time buyers. Higher volume sales will offset the lower profit margins in selling smaller cars. With high energy prices and environmental awareness, consumers in the future will prefer smaller more efficient cars that are environmentally friendly (â€Å"Rush lane†, 2011). Smaller cars are also easier to maneuver in traffic and when parking especially with growing congestion in urban areas and many more cars getting on the road. Smaller cars are also considered easier to handle when driving and