Italian Market Analysis of the Automotive Industry

The Italian Market

Italy is one of the world’s largest economies and a founding member of both the European Union and the North Atlantic Treaty Organization. The country is almost entirely dependent on imports to meet its energy needs. In 2004, Italy’s nominal gross domestic product (GDP) was $1.7 trillion, the fourth largest in Europe and the tenth-largest in the world.
In 2004 wealthy clients accounted for 9.8 per cent of Italy’s total adult population, equivalent to 5.7 million individuals. Within this, 1.0 per cent was classified as high net worth individuals, while the remaining 8.8 per cent fell within the mass affluent category.

The greatest opportunities for revenue growth in the Italian wealth management market are expected to lie in the acquisition of new clients, strengthening of product range and integration of mergers and acquisitions

Italian Taxation

The 2005 budget included substantial tax cuts and a reduction in the number of tax rates from five to four. The top rate was reduced from 44% to 43%. The corporation tax rate, cut from 36% to 33% in 2004, remained unchanged. The application of a lower rate of 19% on a proportion of reinvested profits and capital raised from new stock market issues was restricted in November 2002 and eliminated in 2004. IRAP which is a regional tax on business value added, is levied at 4-5%, but will be replaced from 2006. The basic rate of capital gains tax is 12.5%, but a rate of 27% applies for short-term investment.

Competition

One of our largest competitors in the Italian Market would be the Fiat Group. The Italian vehicle industry is dominated by the Fiat Group, which builds almost all the mass-produced vehicles that are made in the country as well as a large range of more niche products. The story in the Italian vehicle market is a different one; with the dominant Italian group progressively losing its market share to foreign manufacturers who are enjoying ever-improving access to the Italian market The Fiat Group’s domination of the Italian automotive industry is almost total. In 2001 over 90% of all vehicles produced in the country were made by one of the group’s core brands, Fiat, Alfa Romeo, Lancia or it’s truck-making division Iveco. Much of the remainder was made either by Fiat-owned companies or manufacturers in alliances with the Italian giant. This has its disadvantages, for instance the least fact that most component suppliers in Italy depend directly or indirectly on contracts with Fiat for their livelihood. When Fiat moved to reorganize its entire supply contracts during the 1990s to reflect it’s cost-cutting and globalization strategies, the consequences for the components industry were severe. The consequences of relying heavily on its home market can also make life difficult for Fiat Auto, the car-making division of Fiat. If the Italian passenger car market slumps, as in 2002, the fortunes of Fiat Auto will be affected in tandem with its core market. Nevertheless the Italian car market is one of the largest in Europe, and the automotive sector is a vital part of the local economy, with the government collecting upwards of US $70 billion in automotive taxation per year, around 20% of Italy’s total taxation income.

Italy’s Political and Legal Systems

Italy’s political System is that of a Republic, A Republic can be defined “as a political system in which the supreme power lies in a body of citizens who can elect people to represent them A form of government whose head of state is not a monarch; “the head of state in a republic is usually a president(wordnet.princeton.edu,2005)”.

Italy’s Legal system is based on a Civil Law System. A Civil Law System can be defined as laws based on a series of written codes often called the Justinian Code which is very prevalent in Europe, Central and South America, as well as Quebec and
Louisiana.

The Justinian Code is defined as a fundamental work in jurisprudence issued from 529 to 534 by order of Justinian I, Byzantine Emperor. The mechanism of primary elections was quite unseen in Italy before the 2005 regional elections, for which the left-wing alliance The Union delegate its potential electors to decide about the candidates as President of the Regions of Apulia and Calabria. There are no laws at the national level for ruling any primary election. Actually, the Union has always decided itself the main rules for its primaries; the October national primary and the Apulia one have been ruled in a open form, with any potential elector allowed to vote, whereas the Calabria one was in form of political convention. For this reason, people in Italy usually does not consider the primary election Calabria as a “real primary”, and thus define the Apulia one as the first primary election ever held in the country.For the October national primary election, the Union even allowed official immigrants with at least 3 years of stay in the country to participate the voting, as well as Italian citizens abroad.

Italy’s Legal System is higly effective and extremely impartial. Appeals are treated as new trials and all citizens have equal social status and are equal before the law, without regard to their sex, race, language, religion, political opinions, and personal or social conditions, It is also the duty of the republic to remove all economic and social obstacles that, by limiting the freedom and equality of citizens, prevent full individual development and the participation of all workers in the political, economic, and social organization of the country. Due to the many similarities between the Italian political system and the US political System it is highly possible for the Ford Company to branch into the Italian Market. There political system is stable and very effective. And it allows companies the same rights as US companies.

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