automobile 5 forces anil sir assgn

7/30/2019 Automobile 5 Forces ANIL SIR ASSGN

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AUTOMOBILE INDUSTRY IN INDIA

One of the major industrial sectors in India is the automobile sector. Subsequent to the

liberalization, the automobile sector has been aptly described as the sunrise sector of the

Indian economy as this sector has witnessed tremendous growth. Automobile Industrywas delicensed in July 1991 with the announcement of the New Industrial Policy. The

passenger car industry was, however, delicensed in 1993. No industrial license is required

for setting up of any unit for manufacture of automobiles except in some special cases.

The norms for Foreign Investment and import of technology have also been progressively

liberalized over the years for manufacture of vehicles including passenger cars in order to

make this sector globally competitive. At present 100% Foreign Direct Investment (FDI)

is permissible under automatic route in this sector including passenger car segment. With

the gradual liberalization of the automobile sector since 1991, the number of

manufacturing facilities in India has grown progressively. On the canvas of the Indian

economy, automotive industry occupies a prominent place. A sound transportation

system plays a pivotal role in the country's rapid economic and industrial development.

Automotive Industry comprises of automobile and auto component sectors and is

one of the key drivers of the national economy as it provides large-scale employment,

having a strong multiplier effect. Being one of the largest industries in India, this industry

has been witnessing impressive growth during the last two decades. It has been able to

restructure itself, absorb newer technology, align itself to the global developments and

realize its potential. This has significantly increased automotive industry's contribution to

overall industrial growth in the country.


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INDUSTRY PERFORMANCE IN 2011-12

Production

The cumulative production data for April-March 2012 shows production growth of 13.83

percent over same period last year. In March 2012 as compared to March 2011, production

grew at a single digit rate of 6.83 percent. In 2011-12, the industry produced 20,366,432

vehicles of which share of two wheelers, passenger vehicles, three wheelers and

commercial vehicles were 76 percent, 15 percent, 4 percent and 4 percent respectively.

Domestic Sales

The growth rate for overall domestic sales for 2011-12 was 12.24 percent amounting to

17,376,624 vehicles. In the month of only March 2012, domestic sales grew at a rate of

10.11 percent as compared to March 2011.

Passenger Vehicles segment grew at 4.66 percent during April-March 2012

over same period last year. Passenger Cars grew by 2.19 percent, Utility Vehicles grew by

16.47 percent and Vans by 10.01 percent during this period. In March 2012, domestic sales

of Passenger Cars grew by 19.66 percent over the same month last year. Also, sales growth

of total passenger vehicle in the month of March 2012 was at 20.59 percent (as compared

to March 2011). For the first time in history car sales crossed two million in a financial

year.

The overall Commercial Vehicles segment registered growth of 18.20 percent

during April-March 2012 as compared to the same period last year. While Medium &

Heavy Commercial Vehicles (M&HCVs) registered a growth of 7.94 percent, Light

Commercial Vehicles grew at 27.36 percent. In only March 2012, commercial vehicle sales

registered a growth of 14.82 percent over March 2011.

Three Wheelers sales recorded a decline of 2.43 percent in April-March 2012

over same period last year. While Goods Carriers grew by 6.31 percent during April-March

2012, Passenger Carriers registered decline by 4.50 percent. In March 2012, total Three

Wheelers sales declined by 9.11 percent over March 2011.

Total Two Wheelers sales registered a growth of 14.16 percent during April-

March 2012. Mopeds, Motorcycles and Scooters grew by 11.39 percent, 12.01 percent and

24.55 percent respectively. If we compare sales figures of March 2012 to March 2011, the

growth for two wheelers was 8.27 percent.

Exports

During April-March 2012, the industry exported 2,910,055 automobiles


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Growth Drivers of Indian Automobile Market

Rising industrial and agricultural output

Rising per capita income

Favorable demographic distribution with rising working population and middle class

urbanization

Increasing disposable incomes in rural agri-sector

Availability of a variety of vehicle models meeting diverse needs and preferences

Greater affordability of vehicles

Easy finance schemes

Favorable government policies

Robust production

Automobile production

Type of

Vehicle

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Commercial

Vehicle353,703 391,083 519,982 549,006 417,126 567,556 752,735

Three Wheeler 374,445 434,423 556,126 500,660 501,030 619,194 799,553

Passenger

Vehicles1,209,876 1,309,300 1,545,223 1,777,583 1,838,697 2,357,411 2,987,296

Two Wheelers 6,529,829 7,608,697 8,466,666 8,026,681 8,418,626 10,512,903 13,376,451

Total. 8,467,853 9,743,503 11,087,997 10,853,930 11,175,479 14,057,064 17,916,036

Automobile sales


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Type of

Vehicle2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Commercial Vehicles

318,430 351,041 467,765 490,494 384,194 532,721 676,408

Passenger

Vehicle] 1,061,572 1,143,076 1,379,979 1,549,882 1,552,703 1,951,333 2,520,421

Three

Wheelers307,862 359,920 403,910 364,781 349,727 440,392 526,022

Total 7,897,629 8,906,428 10,123,988 9,654,435 9,724,243 12,295,397 15,593,156

Two

Wheelers6,209,765 7,052,391 7,872,334 7,249,278 7,437,619 9,370,951 11,790,305

PASSENGER CAR MARKET IN INDIA.

Rank wise Largest Automobile Manufacturers in India by Sales

1. Maruti Suzuki

2. Hyundai Motors

3. Tata Motors

4. Honda

5. Toyota

6. Ford

7. Mahindra

8. volkswagen

9. GM Chevrolet

10.Fiat Motors


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PORTER FIVE FORCES MODEL IN PASSENGER CAR SEGEMENT

Rivalry

Among

Firms

Threa t of

New

Entrants

Bargaining

Power of

Suppliers

Threa t of

Substitute

Products

Bargaining

Power of

Customers

P

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Threat of New Entrants

High

In most markets, the capital and expertise needed to setup an auto or parts manufacturing

facility would be a great enough barrier to entry to prevent many new entrants from

setting up.

However, given India's incredible growth forecasts, infrastructure progress (especially

new and better roads), and ever-expanding financing options to rural residents, the market

is attractive. As such, we expect the threat of new entrants to be high.

Although the barriers to new companies are substantial, establishing companies are

entering the new markets through strategic partnerships or through buying out or merging

with other companies. However, a domestic company, with local knowledge and

expertise, has the potential to compete its home market against the global firms who are

not well established there.

Bargaining Power of Customers

High

Buyers in India have a wide variety of choice. There are more than 20 foreign

manufacturers selling in India (including ultra high-end such as Rolls-Royce and

Lamborghini). Of course there are also a plethora of incredibly cheap choices, like the

famous Tata Nano and Maruti servo.

In the relationship between the industry and its ultimate consumers, the power axis is

tipped in the consumers favor. This is due to the fairly standardized nature and the low

switching costs associated with selecting from among competing brands.

Threat of Substitute Products

Moderate

India is famous for its two-wheelers (bikes and mopeds) and three-wheelers. These are

very real and obvious threats to auto manufacturers.


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Maruti Udyog limited (MUL) is in a leadership position in the market with a market

share of 48.74

Major strength of MUL is having largest network of dealers and after sales service

centers in the country.

Good promotionalstrategy is adopted by MUL to transfer its thoughts to the people about

its products.

Maruti Suzuki recorded highest number of domestic sales with 9,66,447 units from

7,65,533 units in the previous fiscal. It recently attained the 10million domestic sales

mark.

Strong Brand Value and Loyal Customer Base are big strengths for MUL

There are around 15 vehicles in Maruti Product portfolio. Has good product lines with

good fuel efficiency like Maruti Swift, Diesel, Alto etc

Alto still beats the small car segment with highest number of sales

MUL is the first automobile company to start second hand vehicle sales through its True-

value entity.

MUL has good market share and hence its after sales service is a major revenue

contributor.

Weaknesses

Low interior quality inside the cars when compared to quality players like Hyundai and

other new foreign players like Volkswagen, Nissan etc.

Government intervention due to having share in MUL.

Younger generations started getting a great affinity towards new foreign brands

The management and the companys labor unions are not in good terms. The recent

strikes of the employees have slowed down production and in turn affecting sales.

Maruti hasnt proved itself in SUV segment like other players.

Opportunities

MUL has launched its LPG version of Wagon R and it was a good move simultaneously

MUL can start R&D on electric cars for a much better substitute of the fuel.
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Marutis cervo 600 has a huge potential in tapping the middle class segment and act as a

strong threat to Nano

New DZire from Maruti will capture the market share and expected to create the same

magic as Maruti Esteem(currently not available)

Export capacity of the company is giving new hopes in American and UK markets

Economic growth of the country is constantly increasing and the government is working

hard to increase the gdp to double digit.

Threats

MUL recently faced a decline in market share from its 50.09% to 48.09 % in the previous

year(2011)

Major players like Maruti Suzuki, Hyundai, and Tata has lost its market share due to

many small players like Volkswagen- polo. Ford has shown a considerable increase in

market share due to its Figo.

Tata Motors recent launches like Nano 2012, Indigo e-cs are imposing major threats to its

respective competitors segment

China may give a good competition as they are also planning to enter into Indian car

segment

Launch of Hyundais H800 may result in the decline of Alto sales

automobile 5 forces anil sir assgn

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