ASE STUDY; CAR COSTS ARE CUT THROUGH NEW TECHNOLOGY

In October 2007, Mazda announced that it had developed a catalyst that used up to 90% less platinum and palladium in its manufacture than existing catalysts that helped to boost its cost competitiveness at a time when raw materials and metals prices were rising rapidly.

Mazda which is 33.4 % owned by Ford, said that it had developed the first catalyst for cars using technology that allowed it to cut the use of the expensive metals while maintaining performance. Nissan had made a similar announcement earlier in 2007 stating that it had developed new technologies to reduce the use of precious metals used in catalysts. In addition to the high cost of precious metals used in catalysts, there is concern about dwindling sources of palladium.

Palladium prices, which have soared over the past year, fell with the news of these developments, which came at a time when car makers have been rushing to cut their materials costs amid a demand surge that has pushed up world commodity prices. Vehicle makers are also reviewing their spending on other materials in an attempt to develop low-cost cars for emerging markets.

Japanese vehicle makers are renowned for their low-cost production, but plans by Tata, the Indian group, to develop a $2,500 car has put pressure on Japanese groups to reduce costs even more.

1 .Use demand and supply diagrams to explain why the price of metal palladium fell on news of the technological breakthrough in the production of catalysts for cars.
2.Use demand and supply diagrams to explain how this and other technological breakthroughs might help Mazda and Nissan compete against the low cost producers such as the Tata group which produced the $2,500 car in 2007/08.

3. Give your own views on the likely consequences of the non adoption of new technology in the car industry in a few lines.
Harvard styls