Competition in the Automotive Market: a comparative analysis of Peugeot E-2008 and Volkswagen ID.3 using the Hotelling's model

The transformation currently being witnessed in the automotive industry is deep and potent, largely influenced by technology changing consumer behavior and regulations. The current work investigates the competitive environment of this sector, focusing on market dynamics using the Hotelling's Model between the Peugeot E-2008 & Volkswagen ID.3. The thesis commences with an exhaustive automotive market study introducing how it is structured and what the main players involved are. Subsequently, the most important trends that are reshaping the industry such as electrification, connectivity of vehicles, and autonomous driving are analyzed. The analysis will also include the perspective of governments and regulatory agencies, emphasizing how stringent policies put significant pressure on automakers, shaping their strategic decisions and accelerating the transition towards sustainable mobility. Furthermore, it’ll be given an overview of how these trends are affecting the overall automotive market. The next phase of the study discusses pricing strategies automakers use, namely, value-based pricing, cost-based pricing, and competition pricing. These frameworks will provide insight into how manufacturers navigate into an increasingly complex market, presenting real-life examples from the Stellantis group. In particular, the analysis will highlight how a major industry player approaches competitive dynamics and strategically utilizes its tools to maintain a strong market position and possibly enhance it. The final section explores the application of Hotelling’s Model to competitive dynamics in the automotive sector, especially in the electric market. By using the above-mentioned model, it’ll be studied the interaction of the Peugeot E-2008 and Volkswagen ID.3, two direct competitors in the BEV B-SUV market. By positioning these two models on a differentiation range, the study will focus on how price, tech features, and brand perception are likely to influence consumer choice and behavior. Particularly, it points to the tradeoff between affordability and innovation, with the E-2008 representing a more budget friendly option, contrasting the ID.3, which represents higher technology at a higher price. Results suggest that while electrification creates market parity on sustainability, shifting the market towards an eco-friendlier approach, it is the differences in pricing strategies, level of infrastructure development, and technological integration that create unique market positioning for each player. Also, the paper discusses how some of the emerging hurdles, like charging time , infrastructure availability and range anxiety dictate the pace of consumer adoption and subsequently penetration into the market. By applying Hotelling’s Model, this thesis provides a structured approach to analyze competition in the EV market. The conclusions highlight potential strategies for manufacturers in an industry that is constantly evolving, emphasizing the key roles of pricing strategies, product differentiation, and adapting to regulations in shaping future market dynamics.