Importance of price elasticity of demand to pricing managers

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Reference no: EM133253723

Assignment:

New-energy vehicle production set to increase in SA; Ford could add to hybrid line-up - NAAMSA

While new-energy vehicle (NEV) production numbers are currently low in South Africa, NAAMSA, the Automotive Business Council is hopeful that the numbers will soon increase.

Naamsa CEO Mikel Mabasa says the start of production of the Corolla Cross hybrid at Toyota's Durban plant this year adds to the existing assembly of the Mercedes-Benz C-Class plug-in hybrid (PHEV) at the German car maker's East London plant.

Ford then also looks set to become yet another producer of hybrid vehicles in South Africa, with the proposed production of a plug-in hybrid model in the new Ranger pickup line-up, he notes.

The US car maker has already unveiled the F-150 Lightning full electric bakkie in the US, set for launch in 2022.

NEVs refers to hybrid vehicles, PHEVs and battery electric vehicles (BEVs).

Mabasa says the South African automotive industry does not currently produce any BEVs, with PHEV production at two units in 2020, down from a peak of 1 180 units in 2018.

The decline is largely owing to the run-out of the previous C-Class line-up, with the new model introduced this year.

Mabasa says it is imperative the local automotive industry moves swiftly towards NEV production, as South Africa's primary vehicle export market - the European Union - has indicated that it will not allow internal combustion engines on its roads "in the next five to ten years".

1. Taking the above article and limited resource availability into consideration, use a relevant diagram to explain how Ford can use a production possibilities frontier to illustrate the various combinations of output of new energy vehicles and non-new energy vehicles.

2. Discuss the factors that may affect demand for new energy vehicles.

3. Taking the nature of new energy vehicles into account, motivate the type and importance of price elasticity of demand to the pricing managers.

4. Describe the characteristics of the market structure that is most relevant to the automotive industry.

Reference no: EM133253723

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