case study on oligopoly in automobile industry

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Why the automobile industry is considered an oligopoly?

CIO Bulletin 2024-05-16

The automobile industry stands as a testament to human ingenuity and progress, symbolizing mobility, freedom, and economic prosperity. Operating within the framework of an oligopoly, this industry is characterized by a small number of dominant firms exerting significant influence over market dynamics. Within this intricate web of competition and cooperation, various factors converge to shape the industry's landscape.

Firstly, delving into the historical evolution of the automobile industry reveals a rich tapestry of innovation, entrepreneurship, and industrialization. Pioneers like Karl Benz, Henry Ford, and others laid the groundwork for mass production techniques, revolutionizing transportation and paving the way for the modern automotive era. Their contributions not only shaped the physical infrastructure of roads and highways but also established a cultural and economic foundation that continues to resonate today.

Economically, the automobile industry is subject to a complex interplay of supply and demand forces, influenced by factors such as consumer preferences, technological advancements, and regulatory frameworks. Market concentration, a hallmark of oligopolistic markets, is evident as a handful of major manufacturers dominate global production and distribution networks . Entry barriers, including high capital requirements, stringent safety standards, and intellectual property rights, further solidify the market power of established players while deterring potential challengers.

Brand strategies play a pivotal role in shaping consumer perceptions and market positioning within the automotive industry. Established brands invest heavily in research and development, design innovation, and marketing campaigns to differentiate their products and cultivate brand loyalty among consumers. This emphasis on brand identity and reputation fosters long-term relationships with customers, driving repeat purchases and market share growth.

Moreover, technological innovations serve as catalysts for change within the automotive landscape, driving advancements in vehicle performance, safety features, and environmental sustainability. From electric vehicles to autonomous driving technologies, manufacturers continually push the boundaries of innovation to meet evolving consumer demands and regulatory standards while staying ahead of competitors.

The automobile industry's oligopolistic structure reflects a complex interplay of historical legacies, economic forces, brand strategies, and technological advancements. By unraveling these intricacies, stakeholders can gain deeper insights into the dynamics of this vital sector and navigate its challenges and opportunities more effectively.

Historical Evolution

Karl Benz and Henry Ford, among other visionaries, pioneered mass production techniques and revolutionized transportation, shaping the modern automobile industry. Their contributions established a foundation of innovation and industrialization that persists to this day. By streamlining production processes and making automobiles more accessible, they transformed society's mobility and economic landscape. The principles they introduced, such as assembly line manufacturing and affordable pricing, continue to influence industry practices, contributing to the oligopolistic nature of the automotive market.

Economic Forces at Play

Market concentration is a defining characteristic of the automobile industry, with a small number of major manufacturers dominating the market. These manufacturers, often referred to as the "Big Players," wield significant influence over pricing, product offerings, and industry trends. Their dominance is further reinforced by formidable entry barriers that pose substantial challenges for new entrants.

One of the primary entry barriers is the high capital requirements associated with establishing an automobile manufacturing operation. Building manufacturing facilities, investing in research and development, and setting up distribution networks require substantial financial resources. This high capital investment acts as a deterrent for potential new entrants, limiting the number of players in the market.

Additionally, stringent regulatory requirements pose another significant barrier to entry. Automobile manufacturing is subject to a wide range of regulations, including safety standards, emissions regulations, and environmental requirements. Complying with these regulations requires substantial time, expertise, and financial investment, making it challenging for new companies to enter the market.

This concentration of power has significant implications for market dynamics. Established manufacturers have the ability to influence industry trends, set prices, and dictate product specifications. They also have greater bargaining power with suppliers and distributors, allowing them to negotiate favorable terms and maintain their competitive advantage.

Product Differentiation and Brand Loyalty

In the fiercely competitive automobile market, brand differentiation serves as a linchpin for attracting and retaining consumers. Major automobile manufacturers allocate substantial resources to product innovation, design, and marketing endeavors, aiming to carve out distinct identities that resonate with consumers. By offering unique features, superior quality, and compelling branding, these companies cultivate strong brand loyalty among consumers. This loyalty translates into repeat purchases and enduring market share, as customers develop trust and affinity towards their preferred brands. As a result, brand differentiation stands as a pivotal strategy in navigating the competitive landscape of the automobile industry.

Market Interdependence and Collusive Behavior

Strategic interactions and collusive behaviors often underlie seemingly competitive relationships among major players. Despite outward competition, these companies engage in tacit agreements and coordinated actions to manipulate pricing strategies, influence supply chain decisions, and control market dynamics. Through subtle collaborations and strategic maneuvers, they aim to maintain market stability and enhance profitability, leveraging their collective influence to shape industry trends and outcomes. This interdependence among key players highlights the intricate web of relationships that define the competitive landscape of the automobile sector, where collaboration and competition coexist in a delicate balance.

Technological Advancements and Innovation

Technological advancements and innovation are paramount for staying competitive and meeting evolving consumer needs. From enhancing safety features to improving fuel efficiency and sustainability, cutting-edge technology drives continuous progress across the sector. Established manufacturers and emerging players alike prioritize research and development to pioneer new technologies, ensuring their products remain at the forefront of innovation. By embracing technological advancements, companies not only meet regulatory standards but also exceed consumer expectations, setting new benchmarks for performance, convenience, and environmental responsibility in the ever-evolving automotive landscape.

The oligopolistic structure of the automobile industry is deeply rooted in its historical evolution, economic complexities, brand differentiation strategies, and technological innovations. From the pioneering efforts of visionaries like Karl Benz and Henry Ford to the modern-day advancements in safety and sustainability, a multitude of factors have converged to shape the industry's landscape.

The high barriers to entry, driven by substantial capital requirements and stringent regulatory standards, create a formidable environment for potential new entrants, reinforcing the dominance of established players. Furthermore, the fierce competition among major brands necessitates continuous investment in product differentiation, marketing, and innovation to maintain market share and consumer loyalty.

Despite the appearance of competition, strategic interactions and collusive behaviors among industry giants underscore the interdependent nature of the market, influencing pricing decisions and overall market stability.

Moving forward, stakeholders in the automotive industry must remain vigilant and adaptable in the face of evolving consumer preferences, technological advancements, and regulatory landscapes. By understanding and navigating these complexities effectively, industry participants can position themselves for success in the dynamic and competitive automotive market of the future.

1. How has historical pioneers like Karl Benz and Henry Ford influenced the structure of the automobile industry today?

Pioneers like Karl Benz and Henry Ford revolutionized mass production and accessibility, shaping today's automobile industry through innovative manufacturing techniques and widespread adoption of automobiles.

2. What are the primary barriers to entry for new companies attempting to enter the automobile manufacturing market?

High capital requirements, regulatory hurdles, and economies of scale present significant barriers to entry for new companies in the automobile manufacturing market.

3. How do major automobile brands differentiate their products to create brand loyalty among consumers?

Major automobile brands invest in product innovation, design, and marketing to differentiate their offerings, fostering brand loyalty among consumers through unique identities and customer experiences.

4. What role do strategic interactions and collusive behaviors play in shaping the competitive landscape of the automobile industry?

Strategic interactions and collusive behaviors among major players influence pricing strategies, supply chain decisions, and market dynamics, shaping the competitive landscape of the automobile industry.

5. In what ways do technological advancements drive innovation within the automobile industry, and how do established players respond to disruptive innovations from new entrants?

Technological advancements drive innovation in safety, efficiency, and sustainability within the automobile industry. Established players invest in research and development to stay ahead of disruptive innovations from new entrants, maintaining their competitive edge.

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Historical Examples of Oligopolies

• Industry Consolidation on the Rise
• Media Conglomerates
• Wireless Carriers

The Big 3 Music Labels

• Domestic Airlines
• Market Structures on a Spectrum

Frequently Asked Questions

The bottom line, the most notable oligopolies in the us.

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Jingying Zhao / Getty Images

An oligopoly is when a market is shared by only a small number of firms, resulting in a state of limited competition. An oligopoly is similar to a monopoly, but in a monopoly , only a single company or group owns all or nearly all of the market for a given type of product or service.

There is no upper limit to the number of firms in an oligopoly . However, the number must be low enough that the actions of one firm significantly influence the others. Even though companies within oligopolies are competitors, they tend to cooperate with each other—either directly or indirectly—in order to benefit as a whole. This often leads to higher prices for consumers.

Key Takeaways

• An oligopoly is when a market is shared by only a small number of firms, resulting in a state of limited competition.
• Since the 1980s, it has become more common for industries to be dominated by two or three firms as merger agreements between major players have resulted in industry consolidation.
• Currently, some of the most notable oligopolies in the U.S. are in film and television production, recorded music, wireless carriers, and airlines.

For consumers and citizens, the consolidation of private power generally means they will incur higher costs, and historically, consumer efforts have been effective over time at stopping some of the abuses of power that result from industry consolidation.

• Government policy can discourage or encourage oligopolistic behavior, and firms in mixed economies often seek government blessing for ways to limit competition.

Oligopolies in history include steel manufacturers, oil companies, railroads, tire manufacturing, grocery store chains, and wireless carriers. The conditions that enable oligopolies to exist include high entry costs in  capital expenditures , legal privilege (license to use wireless spectrum or land for railroads), and a platform that gains value with more customers (such as social media). The railroad boom in the 19th century was ripe with such conditions.

In the United States during the mid- to late-1800s, a boom of railroad construction took place, including establishing the transcontinental railroad that stretched from the East Coast to California. Railroads, being both capital and labor-intensive, presented high barriers to entry and legal status as a sort of public utility. Four of the five transcontinental railroads were built with assistance from the federal government through land grants, receiving millions of acres of public lands from Congress.  

This allowed for an oligopoly, especially as smaller competitors were acquired. For instance, in 1901, nine locomotive manufacturing companies combined in a merger to form the American Locomotive Company (ALCO).  

Industry Consolidation Is on the Rise

Throughout history, there have been oligopolies in many different industries, including steel manufacturing, oil, railroads, tire manufacturing, grocery store chains, and wireless carriers. Currently, some of the most notable oligopolies in the U.S. are in film and television production, recorded music, wireless carriers, and airlines.

Since the 1980s, it has become more common for industries to be dominated by two or three firms. Merger agreements between major players have resulted in industry consolidation.

The  concentration ratio  measures the market share of the largest firms in an industry and is used to detect an oligopoly. There is no precise upper limit to the number of firms in an oligopoly, but the number must be low enough that the actions of one firm significantly influence the others.

The economic and legal concern is that an oligopoly can block new entrants, slow innovation, and increase prices, all of which harm consumers. Firms in an oligopoly  set prices , whether collectively—in a  cartel —or under the leadership of one firm, rather than  taking prices  from the market. Profit margins are thus higher than they would be in a more competitive market.

Media Conglomerates Dominate Film and Television

Film and television production in the U.S. is dominated by the film and television production units of five media conglomerates: The Walt Disney Company, WarnerMedia, NBCUniversal, Sony, and ViacomCBS. In 2023, the box office proceeds of NBCUniversal exceeded $4.9 billion, beating out Disney's $4.82 billion, who has held the number one spot since 2015.

Previously, 21st Century Fox was included in this list of the largest film production companies, but in March 2019, all the media assets of 21st Century Fox were acquired by Disney for $71.3 billion. This acquisition made The Walt Disney Company the largest media company in the world.

Wireless Carriers Represent Highly-Concentrated Industry

The combined market share of the three major wireless carrier companies in the U.S.—T-Mobile, Verizon, and AT&T—is 99.1% as of the end of 2023. In this highly concentrated industry, certain practices that are unfriendly to the consumer have become the norm, including termination fees and sneaky overage charges.

The majority of consumers are locked in contracts with one of these three companies, and there is very little recourse for this oligopoly behavior.

Although there are niche record companies that cater to specific audiences and music styles, the music industry is dominated by three major recording labels: Sony Music Entertainment, Universal Music Group, and Warner Music Group. EMI was included in this group until Universal Music Group purchased EMI in 2012.

When Universal Music Group initially expressed interest in purchasing EMI for $1.9 billion in 2012, industry watchdog groups encouraged the government to stop the deal, claiming that the consolidation would result in the newly created music superpower disrupting pricing and raising costs for consumers. Although a congressional hearing was held and the issue was examined by both American and European regulators, the takeover was eventually approved.

Domestic Airlines Oligopoly

The airline industry in the U.S. is also arguably an oligopoly, with four major domestic airlines— American Airlines, Delta Air Lines, Southwest Airlines, and United Airlines—flying about 67% of all domestic passengers in 2023.

Prior to 1978, domestic air travel in the U.S. was managed like a public good by the Civil Aeronautics Board (CAB). They established schedules, fares, and approved new routes. With the introduction of the Airline Deregulation Act in 1978—intended to increase competition in the airline industry—the price of fares dropped, in addition an increase to the number of flights offered.

However, after extensive consolidation in the industry and the failure of many smaller airlines, prices of airline flights started to sharply rise and have continued to rise despite the sharp decline in the cost of fuel. In addition, starting in 2008, airlines have begun charging fees for services that were earlier included in the airfare.

Market Structures Exist on a Spectrum

In reality, market structures should be thought of as on a spectrum from pure monopoly to perfect competition. While these industries all exhibit oligopoly behavior, structural shifts could easily upend the existing powers in the coming decades.

Is the automobile industry an oligopoly?

Automobile manufacturing is an example of an oligopoly, with the leading auto manufacturers in the United States being Ford ( F ), GM, and Stellantis (the new iteration of Chrysler through mergers). Worldwide there remain perhaps just a dozen key automakers including Toyota, Honda, Volkswagen Group, and Renault-Nissan-Mitsubishi.

What is a homogenous oligopoly?

A homogenous, or undifferentiated oligopoly involves a small group of firms that all produce the same product, often in a standardized fashion. Oil companies, for example, all produce crude oil that is then standardized through the refining process.

What is a differentiated oligopoly?

Unlike a homogenous oligopoly, a differential one involves firms that produce close, but not perfect substitutes . For example, car companies all produce vehicles, but a luxury car is not a perfect substitute for a rugged pickup truck.

How does the prisoner's dilemma relate to oligopoly?

The prisoner's dilemma is a scenario in  decision analysis  and game theory in which two actors, acting in their own self-interests do not produce the optimal outcome. For firms in an oligopoly, the problem is that each individual firm has an incentive to undercut the others—if all firms in the oligopoly agree to jointly restrict supply and keep prices high, then each firm stands to capture substantial business from the others by breaking the agreement undercutting the others. The result is a sub-optimal outcome for all firms involved.

What is a Cournot oligopoly?

The Cournot oligopoly model is a popular model to depict conditions of imperfect competition . lt describes an industry structure in which rival firms offering identical products compete on the amount of output they produce, independently and at the same time. The idea that one firm reacts to what it believes a rival will produce forms part of the perfect competition theory.

Oligopolies exist naturally or can be supported by government forces as a means to better manage an industry. Customers can experience higher prices and inferior products because of oligopolies, but not to the extent they would through a monopoly, as oligopolies still experience competition. The majority of the industries in the U.S. have oligopolies, creating significant  barriers to entry  for those wishing to enter the marketplace.

OpenStax. " Principles of Economics 3e: 9.1 How Monopolies Form: Barriers to Entry ."

OpenStax. " Principles of Economics 3e: 10.2 Oligopoly ."

Library of Congress. " Railroads in the Late 19th Century ."

Special Collections Research Center, Syracuse University Libraries. " American Locomotive Company (ALCO) Records ."

OpenStax. " Principles of Economics 3e: 11.1 Corporate Mergers ."

Variety. " Universal Overtakes Disney as Highest-Grossing Studio at 2023 Box Office ."

The New York Times. " Disney Moves From Behemoth to Colossus With Closing of Fox Deal ."

Statista. " Largest US Cell Phone Companies Market Share 2023 ."

Billboard. " Record Label Market Share Q1 2024: Warner Records Posts Huge Gains While Universal Enters a New Era ."

The New York Times. " U.S. and European Regulators Approve Universal’s Purchase of EMI ."

Statista. " Domestic Market Share of Leading U.S. Airlines from February 2022 to January 2023 ."

Scott A. Wolla. " The Economics of Flying: How Competitive Are the Friendly Skies? " Page One Economics , Federal Reserve Bank of St. Louis, November 2018.

Library of Congress. " Economic Regulation of the Commercial Aviation Sector and the 1978 Airline Deregulation Act ."

Smithsonian, National Air and Space Museum. " Airline Deregulation: When Everything Changed ."

U.S. Energy Information Administration. " Petroleum & Other Liquids: U.S. Gulf Coast Kerosene-Type Jet Fuel Spot Price FOB ." Select Annual View.

U.S. Bureau of Labor Statistics. " Airline Fares in U.S. City Average, All Urban Consumers, Not Seasonally Adjusted ." Select "Date Range: 1978 to 2024."

The New York Times. " Like American, More Airlines Add Fees for Checking Luggage ."

All American. " State of American Auto Manufacturing Report ."

Renault Group. " Renault-Nissan-Mitsubishi Alliance Open a New Chapter for Their Partnership ."

ScienceDirect. " Cournot ."

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The effects of oligopoly in the US Automobile sector on pricing and development

Term paper, 2010, ricardo falter (author).

Abstract or Introduction

The US automobile industry is a good example of an oligopoly. It consists mainly of three major firms, General Motors (GM), Ford, and Chrysler. The influence of this oligopoly can be seen in the prices and the development and introduction of new car models into the American car market. Extensive work has been done on the field of collusive behaviour in the US automobile market and moreover the introduction of the small car in the 1950s shows how the firms collude when it comes to the introduction of a new car.

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Product Differentiation and Oligopoly in International Markets: The Case of the U.S. Automobile Industry

• P. Goldberg
• Published 1 July 1995
• Econometrica

695 Citations

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Home — Essay Samples — Economics — Oligopoly — The Oligopoly Market: A Case Study of General Motors

The Oligopoly Market: a Case Study of General Motors

• Categories: Oligopoly

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Published: Mar 8, 2024

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Introduction, general motors, general motors' response to market forces.

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• 21 June, 2024

This is why the automobile industry is considered an oligopoly

• . May 10, 2021
• 2,749 Views

Last Updated on June 3, 2024 by Victor A

One of the most competitive, and unforgiving industries in the world is the automobile industry. Owing to the enormous amounts of money required to enter, the fact that most brands are controlled by a few companies, and that customers are often loyal, it’s no wonder why the automobile industry is considered an oligopoly . If you want to understand better why this is the case, you’re at the right article.

What is an oligopoly?

First of all, let’s define oligopoly :

• An oligopoly is a market structure where a few companies control the industry while they keep each other from having significant influence over the others.

When one company controls an industry it’s called a monopoly, and if two firms dominate an industry it’s considered a duopoly. An oligopoly happens when two or more companies are in control like it happens in the auto industry.

The automobile industry is dominated by a few key players

Even though there are plenty of car brands, most of them are controlled by a few companies. Twelve automobile companies control over fifty brands , while there are only nine brands that remain independent. 

Here’s an infographic that shows the situation:

In essence, this is how it goes:

• Stellantis owns Fiat, Lancia, Maserati , Alfa Romeo , Chrysler, Ram, Dodge , Jeep , Vauxhall, Opel, Peugeot, DS Automobiles, and Citroën
• Volkswagen Group owns Audi, Seat, Skoda, Bugatti, Bentley , Porsche , Volkswagen , and Lamborghini
• Renault–Nissan–Mitsubishi Alliance owns Dacia, Renault, Mitsubishi, Infiniti , Nissan, and Alpine
• General Motors Company owns Chevrolet, Cadillac, GMC, and Buick. 
• Hyundai Motor Group owns Kia, Hyundai , and Genesis
• Geely owns Volvo , Lotus, and Polestar
• BMW Group owns Mini, BMW , and Rolls-Royce
• Tata Motors owns Land Rover and Jaguar
• Toyota Motor Corporation owns Toyota and Lexus
• Ford Motor Company owns Ford and Lincoln
• Daimler AG owns Mercedes-Benz and Smart
• Honda Motor Company owns Acura and Honda

Even though control is exerted by those 12, 9 brands remain independent :

• Aston Martin

It’s important to note that owning a lot of brands doesn’t mean higher revenues or profits.

This is clearly portrayed when looking at the 2020 top car companies by revenue, where Toyota Motor Corporation tops the list, while only owning two brands. However, we find here another reason why the automobile industry is considered an oligopoly, just a few companies get most of the revenue .

Here’s a list with the 2020 top 5 auto companies by revenue:

The automobile oligopoly has significant barriers to entry

When it comes to entering the automobile industry, things become quite complicated since it requires huge amounts of money due to its high costs; specialized knowledge on the products, the competition, the customers, and how the industry works; and understanding different government policies around the world .

It requires huge amounts of money

Researching, designing, developing, and advertising a car calls for a lot of money, it’s no wonder why we usually don’t see many new companies succeeding in the automobile industry. 

One of the keys to succeeding in such an industry are economies of scale. Producing cars in high quantities will allow a company to lower its costs, improve efficiencies and negotiate better prices with suppliers.  

But having a lot of capital resources doesn’t guarantee success. What can be expected is to lose money for a long time, as it happened to Tesla, which managed to have a profitable year for the first time in 2020 , that’s 17 years after it was founded. (July 1, 2003).

Specialized knowledge

Having the right knowledge is as crucial as having the right amount of money.

The automobile industry has an excessive high competition in R&D (Research and Development) . Companies spend millions every year in innovating and improving in many areas like safety, fuel efficiency, technology, emission, etc.

It’s common to regularly hear about how top-level executives, designers, and engineers are being hired from one automobile company to another. It just proves how much they value knowledge, and how much they are willing to spend to perfect their products.

Government policy

When an automaker decides to enter a new country, it needs to fully understand how the laws and the government work in said country. Some governments create policies that restrict market entry since they prefer to incentivize local companies rather than foreign companies.

A great example would be the People’s Republic of China, a very hot market, with countless potential customers but with laws that limit foreign investment.

Not so long ago, China required foreign companies to create a 50:50 joint venture with a local Chinese company , this was a big problem for many foreign companies as they had to transfer manufacturing capability, know-how, and intellectual properties to its partner, which could form other joint ventures with other companies, sometimes causing information leakage, and intellectual property infringements. 

However, on March 15, 2019, China adopted a new law that came into effect on January 1, 2020, that made foreign investment less troublesome, banning the forced transfer of technology and protecting intellectual property.

It depends on brand loyalty and image to generate sales

Brand loyalty happens when a brand successfully satisfies most of its customer’s needs, creating a degree of loyalty that difficult any attempt of luring from other brands. 

In the automobile industry, loyalty is based on people who decide to choose the same brand when buying their next vehicle.

Car brands understand how important customer retention is, as they will do many things to improve the experience of customers. This is a problem for new car brands as they will have to find ways to entice customers, which can be quite difficult if their needs are being satisfied.

According to the 2020 J.D. Power U.S. Automotive Brand Loyalty Study , Subaru has the highest brand loyalty, with 60,5%, followed closely by Toyota, with 60,3%, and Honda with 58.7%; find below a list with the Top 10 brand loyalty car brands:

The Bottom Line – Why the automobile industry is considered an oligopoly

It makes sense why we don’t usually see new companies succeeding in the automobile industry, it takes a lot of time, resources, and knowledge to become competitive.

Yet, once in a while there’s a company that manages to succeed despite all odds, the most recent one, Tesla. 

Tesla has been able to become a real threat to other automakers because they well-understood where the industry was heading, and acted, while the legacy automakers were too busy doing the same things. This gave them a head start and allowed them to create a well-established brand name.

Tesla recognized a need for innovation that automakers were not fulfilling. They focused solely on electric vehicles, while most automakers were either investing in internal combustion engines (ICE), hybrids, or just a little bit on electric. 

But Tesla did not only focus on the powertrain, they also looked for more innovations that many automakers were dismissing , like on autopilot , car chassis, infotainment, etc. 

After a while, Tesla is aiming to become a major player in the near future, as they start producing less expensive cars, and improve production efficiencies.

In essence, the reasons why the automobile industry is considered an oligopoly are:

• It has significant barriers to entry.
• It depends on brand loyalty and image to generate sales.
• It is dominated by a few key players.

Source: Investopedia (car companies by revenue) , J.D. Power (Brand Loyalty) , CFI , Business Insider

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This question is about what an automotive engineer does .

Why is the automobile industry considered an oligopoly?

The automobile industry is considered an oligopoly because it has considerable boundaries to enter it, it relies on brand loyalty and image to make sales, and it is dominated by three major automobile companies.

The three companies that rule the automobile industry in the United States are General Motors (GM), Chrysler, and Ford. The main concept behind an oligopolistic market is that only a few companies dominate a particular market. These companies then collude with one another to set prices.

This ensures not only the companies' survival but also their mutual ascendance and usually massive profits. In a sense, GM, Ford, and Chrysler have worked with each other to make sure no other US car company can enter the marketplace, therefore guaranteeing each of their successes.

Here are the key features of an oligopolistic market:

There are only a very limited number of sellers for a specific type of product

The sellers involved either sell a differentiated product or a similar product

Companies are unable to enter or exit the industry's market at will

Companies participating in oligopoly must invest large amounts of money

The companies are competitors, yet they work together in certain ways

Price rigidity is at an extremely high level in the market

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• Three value megapools - electrification; software defined vehicles; and circularity — to reach US$660b market value by 2030
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The global automotive industry is on the cusp of a $660b revenue opportunity , as it shifts its focus away from internal combustion engine (ICE) vehicles to electric vehicles (EVs), according to new EY analysis.

The automotive sector is moving away from its traditional value pools, a strategic shift that is driven by evolving customer demand, emerging technologies and tightening regulations. This will see the value in the industry shift from manufacturing and transactional sales to the complete vehicle lifecycle and will open opportunities for automakers, battery manufacturers, suppliers, energy companies, and investors to shift to new areas of focus.

EY analysis has identified three key areas — known as “megapools” — that offer the highest revenue growth potential:

• Supercharge the future (batteries, charging and energy storage): The latest predictions from the EY Mobility Lens Forecaster show that by 2040, the number of registered EVs (battery electric vehicles and plug-in hybrid electric vehicles combined) on the road globally is expected to surpass non-EVs. Batteries and charging are foundational to steering a successful EV transition.
• Redefine the vehicle architecture (software defined vehicles): The shift from hardware to software-defined vehicle (SDV) architectures will not only unlock new revenues in technology and data-based services but also drive cost efficiencies, enhance faster software delivery and improve the quality of fleets.
• Close the loop (battery and vehicle circularity): Moving towards fully circular models aimed at reusing and recycling materials promises a greener automotive industry and solves an increasingly geopolitical war for rare minerals.

Martin Cardell, EY Global Mobility Solutions Leader, says:

“The global automotive industry is undergoing a paradigm shift, with value moving away from manufacturing and transactional sales to the complete vehicle lifecycle. The industry is going to have to refocus on new growth areas, while areas of activity – like combustion engine parts and maintenance – will rapidly fall away. Leaders across the industry need to carefully examine their business models and focus on where they can grow and where they need to reduce activities that are set to become outdated. To succeed in these new areas, companies should embrace innovation, optimize their data strategies and focus efforts on training and nurturing skilled talent. They must choose between becoming either a leader or a fast follower. It’s time to put themselves in the driver’s seat and gear up for the great value shift.”

The value shift is already underway

The EY analysis shows that the great automotive value shift is already underway and gaining momentum. There is an urgency for the players within the mobility ecosystem to optimize today's business while simultaneously innovating for tomorrow. The decision is not whether to engage with the value shift, but how to do so successfully to maximize revenues. 

Developing a reliable and diversified battery supply chain is crucial; China currently owns around three-quarters of global battery metal refining capacity, and various regions are imposing localization regulations (such as the US Inflation Reduction Act). Speeding up the EV transition requires vehicles with greater range, reliability and safety, and lower costs in a fiercely competitive market, as well as a robust charging infrastructure. Significant investments are planned in battery production and charging infrastructure across Europe; automakers have begun integrating vertically to optimize the energy density, lifecycle and thermal stability of their EV batteries.

Winning the great value shift

Understanding the great value shift is only the start — translating it into lasting competitive advantage calls for a complete strategic rethink. Companies in the market must focus on four pivotal actions to win the value shift race: building a culture of innovation; redefining strategy and customer experience; unlocking the value and potential of data; and nurturing future workforce skills.

As the value shift develops, so will the search for talent in these new areas intensify with the focus around skills shifting away from mechanical engineering and toward software and chemical engineering. Innovation in battery, robotics, artificial intelligence (AI) and data will become indispensable. Industry leaders must foster a high-performance culture centered on continuous learning, as workers must be upskilled and reskilled to remain competitive and support sector growth.

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case study of oligopoly on automobile industry

• Case study of oligopoly on automobile industry

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CASE STUDY OF OLIGOPOLY ON AUTOMOBILE INDUSTRY

Presented by :-

Sumit Behura

Suchitra samantray

Farid Ahmad

Chinmaya Mohanty

Nilam priyadarsini Sethy

• Oligopoly is a market structure in which the

market or the industry is dominated by small

number of sellers.

• In other word Oligopoly means the market structure in which there are a few seller selling a homogeneous product or differentiated products.

FEATURESFew seller

Homogeneous or differentiated product

Barriers to entry and exit

High investment

Constant struggle

Lack of uniformity

Lack of certainty

Price rigidity

Selling homogeneous products - pure oligopoly .Example :industry producing cement steel ,petrol ,cooking gas , chemical, aluminium and sugar .

Selling differentiated product – differentiated oligopoly .Example : Automobiles, TV sets , soft drinks , computers ,cigarettes ,etc.

OLIGOPOLY IN AUTOMOBILE INDUSTRY• The Indian Car Industry Oligopoly• Hindustan Motors – the first Indian Car company to start production in

India - founded in 1942 by Mr. B.M. Birla; Ambassador – The flagship

• Establishment of other car manufacturing companies like Premier

Automobiles(1944); Premier Padmini – The flagship car, now also used

for cab services

Reasons for the Oligopoly structure

• In 1947, Government of India and private sector launched efforts to

create Automotive components manufacturing industry

• Slow growth in 1950s and 1960s; Reason: License Raj,

Nationalization, Socialistic approach, MRTP Act

• The Industries (Development and Regulation) Act passed in 1951 to

implement Industrial Policy Resolution of 1948 – one of the reasons

for closed market

• The Act empowered Government to prescribe Prices, Methods,

Volume of Production, Channels of Distribution

Impact of Oligopoly structure

• Impact on Automobile industry – Growth very slow because of

Low Demand and Low Economic Status of the country

• Government restrictions provided no motivation or incentive for

firms to do technological upgradation.

• Supply was low and there weren’t many competitors

• Impact on Consumers –Consumers did not have many choices;

the Demand was fairly low as Cars were still a Luxury and

availability of same models

The Causes of Transformation

• Sanjay Gandhi owned Maruti Technical Services Limited which was

• After his death, Indira Gandhi government collaborated with Suzuki

Motors, a Japanese firm, for collaboration – Formation of Maruti

Udyog Limited and renamed later Maruti Suzuki in 2007

Effects of the Transformation

• New firms, including foreign players, entered with modern

engineering, efficient processes and modern shop-floor layouts

• Indian automobile industry grew at 14.31% per annum in 1991

era compared to 8.56% per annum during 1985-91

• Delicencing of sector attracted many major Global

automobile(GM, Ford, Honda, Hyundai etc.) to start assembly

Automobile Industries associated with India

• Quite a few Domestic Indian Automotive companies: Tata

Motors, Mahindra, ICML, Hindustan Motors, Premier

Automobiles Ltd., San Motors etc.

• Foreign Automotive companies in India:

Manufactured or assembled in India: BMW India, Ford India,

General Motors India, Chevrolet, Honda , Hyundai Motor India

Imported to India: Audi, Bentley, BMW, Lamborghini, Land Rover,

Mercedes Benz, Nissan etc.

Price Leadership Model

• Intense competition amongst various players

• 30th December 1998 - Indica launched by Telco for `2,59,000 (petrol) and `2,85,000 (Diesel)

• 31st December 1998 – Maruti slashes prices by 5-12%; Maruti800 price slashed to `1,85,000 from `2,09,000

• Ratan Tata – “Even for those who do not own or buy an Indica,

good news, we’ve triggered price drops in Maruti and made the

car market a friendlier place”

Current Trends

• Tata has come up with ` 1 Lakh car – Tata Nano

• This again has created price war

• Nissan-Renault to develop a Rs 300000 car using India’s

“frugal engineering expertise”

• Bajaj to experiment with the idea of a small car

Market ShareIn the Passenger Car category, Maruti Suzuki is still the market leader with

around 50% market share

COMOARISION

•Considering huge market potential, production of passenger cars is projected to grow at

CAGR of 11% between 2010-11 and 2013-14.

Comparison:•1982

Number of manufacturers: 3

Vehicle sales: 20000

Number of models: 3

Number of manufacturers: 15

Vehicle sales: 19,80,000 approx.

Number of models: 53

Automobile Industry 11

British Automobile Industry

API Automobile Industry

Automobile Industry - Benchmarking

OLIGOPOLY POWER IN THE CANADIAN DAIRY INDUSTRY

EVA_Indian Automobile Industry

Automobile industry

Automobile Industry 01

Report- Automobile Industry

Competition and Collusion in the American Automobile ... · equilibrium models of oligopoly under product differentiation. ... short-run equilibrium in an industry with differentiated

India Automobile Industry

The automobile industry

AUTOMOBILE INDUSTRY - CAR - INDUSTRY ANALYSIS

Globalization of Indian Automobile Industry Automobile Indust

Automobile industry group5

Indian automobile industry transformation from oligopoly to monopolistic market

Pakistan Automobile Industry

Indian Automobile Sector (Oligopoly to monopolistic transformation)

Automobile Industry Report

Indian Automobile Industry

Industry Solution for Automobile Industry

Automobile industry analysis

automobile spareparts industry

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The world now invests almost twice as much in clean energy as it does in fossil fuels…, global investment in clean energy and fossil fuels, 2015-2024, …but there are major imbalances in investment, and emerging market and developing economies (emde) outside china account for only around 15% of global clean energy spending, annual investment in clean energy by selected country and region, 2019 and 2024, investment in solar pv now surpasses all other generation technologies combined, global annual investment in solar pv and other generation technologies, 2021-2024, the integration of renewables and upgrades to existing infrastructure have sparked a recovery in spending on grids and storage, investment in power grids and storage by region 2017-2024, rising investments in clean energy push overall energy investment above usd 3 trillion for the first time.

Global energy investment is set to exceed USD 3 trillion for the first time in 2024, with USD 2 trillion going to clean energy technologies and infrastructure. Investment in clean energy has accelerated since 2020, and spending on renewable power, grids and storage is now higher than total spending on oil, gas, and coal.

As the era of cheap borrowing comes to an end, certain kinds of investment are being held back by higher financing costs. However, the impact on project economics has been partially offset by easing supply chain pressures and falling prices. Solar panel costs have decreased by 30% over the last two years, and prices for minerals and metals crucial for energy transitions have also sharply dropped, especially the metals required for batteries.

The annual World Energy Investment report has consistently warned of energy investment flow imbalances, particularly insufficient clean energy investments in EMDE outside China. There are tentative signs of a pick-up in these investments: in our assessment, clean energy investments are set to approach USD 320 billion in 2024, up by more 50% since 2020. This is similar to the growth seen in advanced economies (+50%), although trailing China (+75%). The gains primarily come from higher investments in renewable power, now representing half of all power sector investments in these economies. Progress in India, Brazil, parts of Southeast Asia and Africa reflects new policy initiatives, well-managed public tenders, and improved grid infrastructure. Africa’s clean energy investments in 2024, at over USD 40 billion, are nearly double those in 2020.

Yet much more needs to be done. In most cases, this growth comes from a very low base and many of the least-developed economies are being left behind (several face acute problems servicing high levels of debt). In 2024, the share of global clean energy investment in EMDE outside China is expected to remain around 15% of the total. Both in terms of volume and share, this is far below the amounts that are required to ensure full access to modern energy and to meet rising energy demand in a sustainable way.

Power sector investment in solar photovoltaic (PV) technology is projected to exceed USD 500 billion in 2024, surpassing all other generation sources combined. Though growth may moderate slightly in 2024 due to falling PV module prices, solar remains central to the power sector’s transformation. In 2023, each dollar invested in wind and solar PV yielded 2.5 times more energy output than a dollar spent on the same technologies a decade prior.

In 2015, the ratio of clean power to unabated fossil fuel power investments was roughly 2:1. In 2024, this ratio is set to reach 10:1. The rise in solar and wind deployment has driven wholesale prices down in some countries, occasionally below zero, particularly during peak periods of wind and solar generation. This lowers the potential for spot market earnings for producers and highlights the need for complementary investments in flexibility and storage capacity.

Investments in nuclear power are expected to pick up in 2024, with its share (9%) in clean power investments rising after two consecutive years of decline. Total investment in nuclear is projected to reach USD 80 billion in 2024, nearly double the 2018 level, which was the lowest point in a decade.

Grids have become a bottleneck for energy transitions, but investment is rising. After stagnating around USD 300 billion per year since 2015, spending is expected to hit USD 400 billion in 2024, driven by new policies and funding in Europe, the United States, China, and parts of Latin America. Advanced economies and China account for 80% of global grid spending. Investment in Latin America has almost doubled since 2021, notably in Colombia, Chile, and Brazil, where spending doubled in 2023 alone. However, investment remains worryingly low elsewhere.

Investments in battery storage are ramping up and are set to exceed USD 50 billion in 2024. But spending is highly concentrated. In 2023, for every dollar invested in battery storage in advanced economies and China, only one cent was invested in other EMDE.

Investment in energy efficiency and electrification in buildings and industry has been quite resilient, despite the economic headwinds. But most of the dynamism in the end-use sectors is coming from transport, where investment is set to reach new highs in 2024 (+8% compared to 2023), driven by strong electric vehicle (EV) sales.

The rise in clean energy spending is underpinned by emissions reduction goals, technological gains, energy security imperatives (particularly in the European Union), and an additional strategic element: major economies are deploying new industrial strategies to spur clean energy manufacturing and establish stronger market positions. Such policies can bring local benefits, although gaining a cost-competitive foothold in sectors with ample global capacity like solar PV can be challenging. Policy makers need to balance the costs and benefits of these programmes so that they increase the resilience of clean energy supply chains while maintaining gains from trade.

In the United States, investment in clean energy increases to an estimated more than USD 300 billion in 2024, 1.6 times the 2020 level and well ahead of the amount invested in fossil fuels. The European Union spends USD 370 billion on clean energy today, while China is set to spend almost USD 680 billion in 2024, supported by its large domestic market and rapid growth in the so-called “new three” industries: solar cells, lithium battery production and EV manufacturing.

Overall upstream oil and gas investment in 2024 is set to return to 2017 levels, but companies in the Middle East and Asia now account for a much larger share of the total

Change in upstream oil and gas investment by company type, 2017-2024, newly approved lng projects, led by the united states and qatar, bring a new wave of investment that could boost global lng export capacity by 50%, investment and cumulative capacity in lng liquefaction, 2015-2028, investment in fuel supply remains largely dominated by fossil fuels, although interest in low-emissions fuels is growing fast from a low base.

Upstream oil and gas investment is expected to increase by 7% in 2024 to reach USD 570 billion, following a 9% rise in 2023. This is being led by Middle East and Asian NOCs, which have increased their investments in oil and gas by over 50% since 2017, and which account for almost the entire rise in spending for 2023-2024.

Lower cost inflation means that the headline rise in spending results in an even larger rise in activity, by approximately 25% compared with 2022. Existing fields account for around 40% total oil and gas upstream investment, while another 33% goes to new fields and exploration. The remainder goes to tight oil and shale gas.

Most of the huge influx of cashflows to the oil and gas industry in 2022-2023 was either returned to shareholders, used to buy back shares or to pay down debt; these uses exceeded capital expenditure again in 2023. A surge in profits has also spurred a wave of mergers and acquisitions (M&A), especially among US shale companies, which represented 75% of M&A activity in 2023. Clean energy spending by oil and gas companies grew to around USD 30 billion in 2023 (of which just USD 1.5 billion was by NOCs), but this represents less than 4% of global capital investment on clean energy.

A significant wave of new investment is expected in LNG in the coming years as new liquefaction plants are built, primarily in the United States and Qatar. The concentration of projects looking to start operation in the second half of this decade could increase competition and raise costs for the limited number of specialised contractors in this area. For the moment, the prospect of ample gas supplies has not triggered a major reaction further down the value chain. The amount of new gas-fired power capacity being approved and coming online remains stable at around 50-60 GW per year.

Investment in coal has been rising steadily in recent years, and more than 50 GW of unabated coal-fired power generation was approved in 2023, the most since 2015, and almost all of this was in China.

Investment in low-emissions fuels is only 1.4% of the amount spent on fossil fuels (compared to about 0.5% a decade ago). There are some fast-growing areas. Investments in hydrogen electrolysers have risen to around USD 3 billion per year, although they remain constrained by uncertainty about demand and a lack of reliable offtakers. Investments in sustainable aviation fuels have reached USD 1 billion, while USD 800 million is going to direct air capture projects (a 140% increase from 2023). Some 20 commercial-scale carbon capture utilisation and storage (CCUS) projects in seven countries reached final investment decision (FID) in 2023; according to company announcements, another 110 capture facilities, transport and storage projects could do the same in 2024.

Energy investment decisions are primarily driven and financed by the private sector, but governments have essential direct and indirect roles in shaping capital flows

Sources of investment in the energy sector, average 2018-2023, sources of finance in the energy sector, average 2018-2023, households are emerging as important actors for consumer-facing clean energy investments, highlighting the importance of affordability and access to capital, change in energy investment volume by region and fuel category, 2016 versus 2023, market sentiment around sustainable finance is down from the high point in 2021, with lower levels of sustainable debt issuances and inflows into sustainable funds, sustainable debt issuances, 2020-2023, sustainable fund launches, 2020-2023, energy transitions are reshaping how energy investment decisions are made, and by whom.

This year’s World Energy Investment report contains new analysis on sources of investments and sources of finance, making a clear distinction between those making investment decisions (governments, often via state-owned enterprises (SOEs), private firms and households) and the institutions providing the capital (the public sector, commercial lenders, and development finance institutions) to finance these investments.

Overall, most investments in the energy sector are made by corporates, with firms accounting for the largest share of investments in both the fossil fuel and clean energy sectors. However, there are significant country-by-country variations: half of all energy investments in EMDE are made by governments or SOEs, compared with just 15% in advanced economies. Investments by state-owned enterprises come mainly from national oil companies, notably in the Middle East and Asia where they have risen substantially in recent years, and among some state-owned utilities. The financial sustainability, investment strategies and the ability for SOEs to attract private capital therefore become a central issue for secure and affordable transitions.

The share of total energy investments made or decided by private households (if not necessarily financed by them directly) has doubled from 9% in 2015 to 18% today, thanks to the combined growth in rooftop solar installations, investments in buildings efficiency and electric vehicle purchases. For the moment, these investments are mainly made by wealthier households – and well-designed policies are essential to making clean energy technologies more accessible to all . A comparison shows that households have contributed to more than 40% of the increase in investment in clean energy spending since 2016 – by far the largest share. It was particularly pronounced in advanced economies, where, because of strong policy support, households accounted for nearly 60% of the growth in energy investments.

Three quarters of global energy investments today are funded from private and commercial sources, and around 25% from public finance, and just 1% from national and international development finance institutions (DFIs).

Other financing options for energy transition have faced challenges and are focused on advanced economies. In 2023, sustainable debt issuances exceeded USD 1 trillion for the third consecutive year, but were still 25% below their 2021 peak, as rising coupon rates dampened issuers’ borrowing appetite. Market sentiment for sustainable finance is wavering, with flows to ESG funds decreasing in 2023, due to potential higher returns elsewhere and credibility concerns. Transition finance is emerging to mobilise capital for high-emitting sectors, but greater harmonisation and credible standards are required for these instruments to reach scale.

A secure and affordable transitioning away from fossil fuels requires a major rebalancing of investments

Investment change in 2023-2024, and additional average annual change in investment in the net zero scenario, 2023-2030, a doubling of investments to triple renewables capacity and a tripling of spending to double efficiency: a steep hill needs climbing to keep 1.5°c within reach, investments in renewables, grids and battery storage in the net zero emissions by 2050 scenario, historical versus 2030, investments in end-use sectors in the net zero emissions by 2050 scenario, historical versus 2030, meeting cop28 goals requires a doubling of clean energy investment by 2030 worldwide, and a quadrupling in emde outside china, investments in renewables, grids, batteries and end use in the net zero emissions by 2050 scenario, 2024 and 2030, mobilising additional, affordable financing is the key to a safer and more sustainable future, breakdown of dfi financing by instrument, currency, technology and region, average 2019-2022, much greater efforts are needed to get on track to meet energy & climate goals, including those agreed at cop28.

Today’s investment trends are not aligned with the levels necessary for the world to have a chance of limiting global warming to 1.5°C above pre-industrial levels and to achieve the interim goals agreed at COP28. The current momentum behind renewable power is impressive, and if the current spending trend continues, it would cover approximately two-thirds of the total investment needed to triple renewable capacity by 2030. But an extra USD 500 billion per year is required in the IEA’s Net Zero Emissions by 2050 Scenario (NZE Scenario) to fill the gap completely (including spending for grids and battery storage). This equates to a doubling of current annual spending on renewable power generation, grids, and storage in 2030, in order to triple renewable capacity.

The goal of doubling the pace of energy efficiency improvement requires an even greater additional effort. While investment in the electrification of transport is relatively strong and brings important efficiency gains, investment in other efficiency measures – notably building retrofits – is well below where it needs to be: efficiency investments in buildings fell in 2023 and are expected to decline further in 2024. A tripling in the current annual rate of spending on efficiency and electrification – to about USD 1.9 trillion in 2030 – is needed to double the rate of energy efficiency improvements.

Anticipated oil and gas investment in 2024 is broadly in line with the level of investment required in 2030 in the Stated Policies Scenario, a scenario which sees oil and natural gas demand levelling off before 2030. However, global spare oil production capacity is already close to 6 million barrels per day (excluding Iran and Russia) and there is a shift expected in the coming years towards a buyers’ market for LNG. Against this backdrop, the risk of over-investment would be strong if the world moves swiftly to meet the net zero pledges and climate goals in the Announced Pledges Scenario (APS) and the NZE Scenario.

The NZE Scenario sees a major rebalancing of investments in fuel supply, away from fossil fuels and towards low-emissions fuels, such as bioenergy and low-emissions hydrogen, as well as CCUS. Achieving net zero emissions globally by 2050 would mean annual investment in oil, gas, and coal falls by more than half, from just over USD 1 trillion in 2024 to below USD 450 billion per year in 2030, while spending on low-emissions fuels increases tenfold, to about USD 200 billion in 2030 from just under USD 20 billion today.

The required increase in clean energy investments in the NZE Scenario is particularly steep in many emerging and developing economies. The cost of capital remains one of the largest barriers to investment in clean energy projects and infrastructure in many EMDE, with financing costs at least twice as high as in advanced economies as well as China. Macroeconomic and country-specific factors are the major contributors to the high cost of capital for clean energy projects, but so, too, are risks specific to the energy sector. Alongside actions by national policy makers, enhanced support from DFIs can play a major role in lowering financing costs and bringing in much larger volumes of private capital.

Targeted concessional support is particularly important for the least-developed countries that will otherwise struggle to access adequate capital. Our analysis shows cumulative financing for energy projects by DFIs was USD 470 billion between 2013 and 2021, with China-based DFIs accounting for slightly over half of the total. There was a significant reduction in financing for fossil fuel projects over this period, largely because of reduced Chinese support. However, this was not accompanied by a surge in support for clean energy projects. DFI support was provided almost exclusively (more than 90%) as debt (not all concessional) with only about 3% reported as equity financing and about 6% as grants. This debt was provided in hard currency or in the currency of donors, with almost no local-currency financing being reported.

The lack of local-currency lending pushes up borrowing costs and in many cases is the primary reason behind the much higher cost of capital in EMDE compared to advanced economies. High hedging costs often make this financing unaffordable to many of the least-developed countries and raises questions of debt sustainability. More attention is needed from DFIs to focus interventions on project de-risking that can mobilise much higher multiples of private capital.

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