TITLE: AUTOMOBILE INDUSTRY

COURSE: STRATEGIC MANAGEMENT

FACULTY: PROF. SUPRITI MISHRA

Group Members:

Aimad Ahmed (03)

Alice Dash (04)

Khushboo Lahoti (26)

Piyush Bachhawat (32)

Priyanka Lahoti (37)

Subhransu Patnaik (57)

Tulika Vinod (66)

 1. Introduction

The Indian auto industry is one of the largest in the world. The industry accounts for 7.1 per
cent of the country's Gross Domestic Product (GDP). The Two Wheelers segment with 81 per
cent market share is the leader of the Indian Automobile market owing to a growing middle
class and a young population. Moreover, the growing interest of the companies in exploring
the rural markets further aided the growth of the sector. The overall Passenger Vehicle (PV)
segment has 13 per cent market share.

India is also a prominent auto exporter and has strong export growth expectations for the near
future. In April-March 2016, overall automobile exports grew by 1.91 per cent. PV,
Commercial Vehicles (CV), and Two Wheelers (2W) registered a growth of 5.24 per cent,
16.97 per cent, and 0.97 per cent respectively in April-March 2016 over April-March 2015.
In addition, several initiatives by the Government of India and the major automobile players
in the Indian market are expected to make India a leader in the 2W and Four-Wheeler (4W)
market in the world by 2020.

Market Share

The sales of Private Vehicles, Commercial Vehicles and two-wheelers grew by 9.17%, 3.03%
and 8.29% respectively, during the period April-January 2017.

Maruti Suzuki – 49.2%

Hyundai Motors- 17.93%

Mahindra & Mahindra- 8.51%

Toyota- 6%

Tata Motors- 13.1%

Ford- 8%

Renault-Nissan- 10%
 1. Tata Motors Limited

Tata Motors Limited (formerly TELCO, short for Tata Engineering and Locomotive
Company) is an Indian multinational automotive manufacturing company headquartered in
Mumbai, India, and a member of the Tata Group. Its products include passenger cars, trucks,
vans, coaches, buses, sports cars, construction equipment and military vehicles.[3]

Tata Motors has auto manufacturing and assembly plants in Jamshedpur, Pantnagar,
Lucknow, Sanand, Dharwad, and Pune in India, as well as in Argentina, South Africa, Great
Britain and Thailand.

2.1 SWOT Analysis

Strengths:

• It is a strong domestic player and is a key manufacturer of commercial vehicles. It is

the largest automobile manufacturer by revenue.
• It is demand driven and customer oriented, taking care of customer’s preference and
tastes.
• Long list of Portfolio with products like passenger cars, trucks, vans and coaches.
• TM has been in process of acquiring foreign brands to increase its global presence.
Through acquisitions it has its presence in UK, South Korea, Thailand etc.
• Research and Development activities with strong R&D having around 3000 engineers
and scientists.

Weakness:

• Safety standards are often ignored which has diminished the public image of Tata
automobiles.
• Limited customer base
• Tata Motor products are not considered as luxurious. The products are generally
targeted for economy class.
• The company’s product is based upon 3rd and 4th generation platforms which puts
TML at a disadvantage with competing car manufacturer.
Opportunities:

 Leveraging customer engagement experience to acquire new customers

 Leveraging mergers and acquisitions to acquire newer technology
 Expanding automobile market can be a boon for Tata Motors

Threats:

 Low safety standards can hamper the public trust.

 Product innovation and frugal engineering by competitors.

 Competitive products offering same featured at a lesser price.

2.2 Porters Value Chain

Primary Activities:

Inbound Logistics:

 Long term contracts with service provider’s

  Personnel at regional offices for assessing the smooth transit of goods.
 Transparency is maintained and monitoring is done through SAP.
 DTL (Daily Transport Logistics) supplies critical high value items.

Operations:

 Automated manufacturing processes

 Assembly units are at South Africa, Thailand, Bangladesh, Brazil etc.
 TPM (Total Productive Management) team tries to improve efficiency on a regular
basis.
 They have trainee courses to ensure stable source of skilled manpower.

Outbound Logistics:

 Stockyards across the country.

 Long term contracts with transporters to ensure competitive price.
 Regional sales office and vehicle dispatch section is linked through SAP.

Marketing:

 Quick assessment of the changing market dynamics and consumer preferences.

 Clear identification of product requirement, leading to development of innovative
products.
 Large network of dealers so they use technology like CRM-DMS (Customer Relation
Management- Distributor Management).

Services:

 Easy availability of spare parts

 Efficient collection of data from field.
 Large network of workshops for both dealers and TASS
 Training facilities.

Support Activities:

Firm Infrastructure:

• Multi-location facility
 • Technology- SAP (ERP Solution)
• Large product portfolio.

Human Resource Management:

• Career improvement schemes like FTSS (Fast Track Selection Scheme). It is a

benchmark program aimed at providing a unique employee to accelerate the pace of
their career.
• Focus on development of managerial skills- TMTC (Tata Management Training
Center)
• Vast pool of technically competent engineers

Technological Development:

• Knowledge Portal help the employees to keep themselves up-to-date with the latest
technology.
• Formal benchmarking process
• Extensive prototype building and testing facility

Procurement:

• Global sourcing team like China provides tires, power steering; Steel is procured from
Belarus.
• Group Resources from Tata Steel and Tata International
• Localized supplier base at manufacturing locations to maintain low inventory level.

2.3 Porters Generic Strategy

Tata Motors: Cost Leadership

• The focus of Tata Motors is to provide cost effective solution to their customers. It is
a brand of innovation which makes more out of less.
• Tata Motors has its service networks wide and reachable in almost all corners of the
nation but their focus is to provide low cost solutions.
• The use of latest technology, localised supplier base, low inventory levels help them
in gaining cost leadership.
 2. Mahindra and Mahindra Limited (M&M)

The company is an Indian multinational automobile manufacturing corporation headquartered

in Mumbai, Maharashtra, India. It is one of the largest vehicle manufacturers by production
in India and the largest manufacturer of tractors in the world. It is a part of Mahindra Group,
an Indian conglomerate. It was ranked 21st on a list of top companies in India by Fortune
India 500 in 2011.Its major competitors in the Indian market include Maruti Suzuki, Tata
Motors, Ashok Leyland and others.

3.1 SWOT Analysis

Strengths:
1.Mahindra has been one of the strongest brands in the Indian automobile market
2. Mahindra group give employment to over 110,000 employees
3. Excellent branding and advertising, and low after sales service cost
4. Sturdy SUV’s good for Indian roads and off-road terrain

Weaknesses:
1.Mahindra’s partnership with Renault did not live up to international quality standards
through their brand Logan

Opportunities:
1.Developing hybrid cars and fuel efficient cars for the future
2.Tapping emerging markets across the world and building a global brand
3.Fast growing automobile market
4.Growing in the market through electric car Reva (controlling stake) and entry into two-
wheeler segments

Threats:
1. Government policies for the automobile sector across the world
2. Ever increasing fuel prices
3. Intense competition from global automobile brands
4. Substitute modes of public transport like buses, metro trains and many more.

3.2 Porters Chain Analysis

Primary Activities:
Inbound logistics:
 It is located in close proximity with suppliers.

Operations:
 It helps in minimizing manufacturing costs.

Outbound logistics:
 Low cost transport carriers are selected.

Marketing and sales:

 Small, highly trained sales are forced.
 There is national sale advertising.

Services:
  Effective product installations to reduce frequency of recalls.

Support Activities:
Firm Infrastructure:
 Planning costs.
 Planning should be simplified.

HR Management:
 It is effective and efficient.
 It gives effective training programs for employees.

Technological Development:
 It has- easy to use manufacturing technologies.

Procurement:
 Frequent evaluation is done to monitor supplier’s performances.

3.3 Porters Generic Strategy

Mahindra & Mahindra: Differentiation
• It has indomitable market and place in customer’s mind when their focus is on
performance under optimal price.
• Example: It brought in SUV’s in Indian market.
 3. Hyundai Motors

Hyundai group headquartered in Seoul, South Korea. It was founded by Chung Ju-yung in
1947 as a construction firm and Chung was directly in control of the company until his death
in 2001.

Following the 1997 East Asian financial crisis and Chung's death, Hyundai underwent a
major restructuring and break-up, which reduced the Hyundai Group's business to encompass
only container shipping services, the manufacturing of elevators, and tourism. Today, most
companies bearing the name Hyundai are not legally connected to Hyundai Group. They
include Hyundai Motor Group, Hyundai Department Store Group, Hyundai Heavy Industries
Group and Hyundai Development Company. However, most of the former subsidiaries of the
Hyundai conglomerate continue to be run by relatives of Chung. If these companies were
considered as forming a single broad family business, then it would remain the largest
company in South Korea with enormous economic and political power in the country.

4.1 SWOT analysis

Strengths:
 Hyundai, has the largest network of showrooms and service station next to Maruti in
India

 Hyundai owners experience fewer problems with their vehicles than any other car
manufacturer.

Weaknesses:
 HMIL took a long time to gain the market share as its not the first mover in India

 Spare parts of Hyundai vehicles are comparatively priced higher and spare parts do
not have PAN India presence

Opportunities:
 The export markets growth rate is 22.30% compared to last fiscal year
  The saving consumption pattern of India is an added advantage for any segment doing
business in India. This was one of the major reason for Indian market to survive
amidst global recession.

Threats:
 Hyundai faced a slight decline in market share due to tough competition from Ford’s
Figo and Volkswagen- Polo
 Many manufacturers have started to concentrate on small car segment as an
alternative to Nano. These will slow down the expected sales of Eon.

4.2 Porters Value Chain

Primary Activities:
Inbound Logistics:
 Hyundai received goods from their suppliers. They store the goods until they are needed on
the production line. The raw material of Hyundai motors is purchase from all around the
world. Hyundai use JIT (Just In Time) approach for handling of raw material.

Operations:
 Hyundai motors are known for their reliability which comes from efficient operations.
Currently, the company has increased its production capacity. They have separate
departments for activities like painting, welding etc.

Outbound Logistics:
 Hyundai sells vehicles in 193 countries (ehow.com, 2013), and they manage their own
Showrooms in different countries. The company make their product easily assessable.

Marketing and Sales:

 Hyundai Motor Group supports diverse sports events and teams ranging from soccer,
baseball and tennis as means to communicate with people around the world. In true
customer oriented fashion, at this stage the Hyundai motors prepares the offering to
 meet the needs of targeted customers. They also promote their products through Road
Shows.

Service:
 Hyundai value their customers. Here is including warranty.

Support Activities:
Procurement:
 Hyundai motors will be responsible for outsourcing and e-Purchasing. As company
plans the production for the next 3 months and enters into their software, the order for
the raw materials automatically reaches to every vendor. Purchase Department checks
the quality and quantity of raw material and transfer to stores department. They have
also an appropriate capacity to store their raw materials.

Human Resource Management:

 Hyundai consider their employees as human capital. Training and development is the
next main policy has regulatory impact on human resource of Hyundai Motor. This
covers not only activities which improve job performance and also growth of
personality. It helps in the process of individual towards maturity and actualization of
the potential capacities so that they become not only good employees but also good
human being.

Infrastructure:
 The infrastructure at the plants supports production of automobile and its parts for the
domestic as well as overseas market. Hyundai use mechanisms and MIS
(Management Information System) for planning and control in different departments.

4.3 Porters Generic Strategy:

Hyundai- Low cost strategy
• Hyundai caters to the needs of the Indian Middle Class families.
 5. Ford Motors

The Ford Motor Company (commonly referred to simply as "Ford") is an American

multinational automaker headquartered in Dearborn, Michigan, a suburb of Detroit. It was
founded by Henry Ford and incorporated on June 16, 1903. The company sells automobiles
and commercial vehicles under the Ford brand and most luxury cars under the Lincoln brand.
Ford also owns Brazilian SUV manufacturer, Troller, and Australian performance car
manufacturer FPV. In the past, it has also produced tractors and automotive components.
Ford owns an 8% stake in Aston Martin of the United Kingdom, and a 49% stake in Jiangling
of China. It also has a number of joint-ventures, one in China (Changan Ford), one in Taiwan
(Ford Lio Ho), one in Thailand (AutoAlliance Thailand), one in Turkey (Ford Otosan), and
one in Russia (Ford Sollers). It is listed on the New York Stock Exchange and is controlled
by the Ford family, although they have minority ownership (but majority of the voting
power).

5.1 SWOT Analysis

Strength:
 Strong dealership skills
 Strong financial position
 Proven expertise in manufacturing, research, & R&D & automotive marketing

Weakness:
 Poor reputation with investors
 Heavy reliance on pickup track sales
 Low stock price

Opportunities:
 Increased demand for light commercial vehicles used for delivery
 Growing auto market

Threats:
 Lower fuel limit
 Expensive changes to dealership
5.2 PORTERS VALUE CHAIN

Primary Activities:

Inbound Logistics:
 Efficient Quality inspection
 warehousing system

Operations:
 High level of automation

Outbound Logistic:
 Reduce delivery time
 Increase efficiency of finished goods

Marketing & Sales:

 Develop quality
 Increase brand loyalty
 Increase demand creation

Services:
 High level of services to after sales services

5.3 Porters Generic Strategy

Ford – Cost Leadership Strategy

 This generic strategy supports business competitive advantage based on cost reduction
and low price to customers.
 6. TOYOTA

The company was founded by Kiichiro Toyoda in 1937, as a spinoff from his

father's company Toyota Industries to create automobiles. Three years earlier, in 1934, while
still a department of Toyota Industries, it created its first product, the Type A engine, and, in
1936, its first passenger car, the Toyota AA. Toyota Motor Corporation produces vehicles
under five brands, including the Toyota brand, Hino, Lexus, Ranz, and Daihatsu. It also holds
a 16.66% stake in Fuji Heavy Industries, a 5.9% stake in Isuzu, as well as joint-ventures with
two in China (GAC Toyota and Sichuan FAW Toyota Motor), one in India (Toyota
Kirloskar), one in the Czech Republic (TPCA), along with several "nonautomotive"
companies.[13] TMC is part of the Toyota Group, one of the largest conglomerates in the
world.
Toyota is the world's market leader in sales of hybrid electric vehicles, and one of the largest
companies to encourage the mass-market adoption of hybrid vehicles across the globe.
Cumulative global sales of Toyota and Lexus hybrid passenger car models achieved the
10 million milestones in January 2017. Its Prius family is the world's top selling
hybrid nameplate with over 6 million units sold worldwide as of January 2017.
In 1981, Toyota Motor Co., Ltd. announced plans to merge with its sales entity Toyota Motor
Sales Co., Ltd. Since 1950, the two entities had existed as separate companies as a
prerequisite for reconstruction in postwar Japan. Shoichiro Toyoda presided over Toyota
Motor Sales in preparation for the consummation of the merger that occurred in 1982.
Shoichiro then succeeded his uncle Eiji as the President of the combined organization that
then became known as Toyota Motor Corporation.

6.1 SWOT Analysis:

Strength:
1. Toyota company has a very innovative culture in his workplace
2. It is the industry leader in production and sales
3. It has a very strong brand portfolio in the market
4. The brand has a high value of $30 billion.

Weakness:
1. It has large recalls
2. Weak presence in the emerging market
 3. Its design is less flexible due to the large sized car

Opportunities:
1. The positive attitude of the market towards green vehicles
2. Increasing fuel prices
3. Changing customer needs is the major opportunity for the company in the new market

Threats:
1. New emission standards
2. Rising prices of raw materials and components have decreased the margin of the
company
3. Intense competition and the rise in number of competitors have compressed the
market share of Toyota.
4. Fluctuating fuel prices

6.2 Porter’s Value Chain

Primary activities
Inbound logistics:
 Receiving, storing, and disseminating inputs. E.g., warehousing, inventory

 Toyota in obtaining raw materials, they do not process their own, or create your own,
they use a third party, they handed the small parts, such as leather seats, steering
wheel, tire, to local companies, but to the nature of strategic importance, like a
machine, they import from Japan (centre), it's all to maintain the quality standard that
was created Toyota,

 Toyota put on the assembly system in the process, it has led to Toyota raw material
supply for its assembly, need a place to store supplies, or warehouse, to avoid piling
up too many assets, Toyota to forecast demand,

Operations:
  Transforming inputs into the final product form, in assembly and manufacturing (its
production) Toyota use various systems to be efficient and effective, we could also
call it, TPS is the Toyota Production System, the following explanation

Outbound logistics:
 Collecting, storing and distributing the product to buyers

 output of the production process at the plant, is the finished product, a car, the car is
directly sent to the Toyota dealer, it's for local, or a region (not crossing the sea in
distributional, if sending more distant or export, its delivery using container.

Marketing and sales:

 Providing a means and incentive which allow buyers to purchase the product

 Application of Indirect Channels Distribution TOYOTA CORPORATE

 Toyota Motor Company was founded in 1937 by the Toyoda family. Business was
relatively successful until Eiji Toyoda introduce lean production methods after
studying Ford's Rouge plant in Detroit in 1950. Lean production methods became
known as the Toyota Production System.

 In the application of the Toyota Company or its product distribution channels to use
indirect distribution networks which use the Company Toyota dealer or distributor.

Service:
 Providing service to enhance or maintain the value of the product

 Toyota managed to outperform its competitors from the automotive industry in

customer satisfaction. The Best Total Ownership Experience 'is a principle that is
always carried by Toyota at each line, starting from the central office to the Toyota
dealership on every spread in Indonesia. Their concept is the customer number one, so
that makes them always trying to meet customer needs and continuously improve
services.

Support Activities
Firm infrastructure:
  Infrastructure owned by Toyota factory is very modern and sophisticated, is a robotic
system with humans as the operator, all the production support until the sale is
available with either situation, the factory to the dealer.

Human Resource Management:

 Toyota to this day has approximately 300,000 employees worldwide, and nearly a
third are in Indonesia, in penenmpattanya or acceptance of an employee, the company
held a test salalu continued with the training, according to its disciplines and
expertise,

Technology Development:

 Torrance (DP) - As one of the world's largest manufacturers, Toyota is very

concerned with the safety of its customers. That is why Toyota did not stop doing
research and development of safety technology.

 Currently, Toyota has several safety technologies being developed. In fact, Toyota,
now, focus on developing technologies that protect older drivers and pedestrians.

 Build safer cars into the centre of Toyota's global vision. Learning from data in the
real world, Toyota continues to improve testing, products and services, by
establishing a Collaborative Safety Research Centre in the USA.

Procurement:
 At Toyota Industries Corporation, our procurement activities are based on fair
business practices to realize amicable relationships and mutual benefit.

 Toyota Industries Corporation is involved in a wide range of business fields and

procures the parts, materials, and equipment for these many different businesses from
suppliers all over the world. Along with requiring our suppliers to provide quality
items at a low price and in a timely manner, we cooperate with them to promote
environmental preservation and meet the other demands of society. In addition, we
take a long-term view toward our relationships with suppliers with an aim to realize
an amicable relationship of mutual benefit based on fair business practices.
6.3 Porter’s Generic Strategy:
Toyota Motors: Cost Leadership Strategy

 Toyota Motor Corporation’s generic strategy is a combination of the cost leadership

generic strategy and the broad differentiation generic strategy. Cost leadership entails
minimizing cost of operations and selling prices. On the other hand, the broad
differentiation generic strategy requires developing business and product uniqueness
to ensure Toyota’s competitive advantage. The combination of these generic
strategies supports Toyota’s global reach in all market segments.

Relationship between Porter’s Value Chain and Generic Strategy:

The cost leadership strategy of Toyota is affected by various factors including the
Primary activities like Inbound & Outbound logistics, Operations and Support
activities like Procurement.
However, the differentiation strategy of the company is also affected by many factors
like Marketing & Sales The additional services (that provides customer satisfaction)
and the continuous technological development.
 7. MARUTI SUZUKI

Maruti Suzuki India Limited, formerly known as Maruti Udyog Limited, is an automobile
manufacturer in India. It is a subsidiary of Japanese automobile and motorcycle manufacturer
Suzuki Motor Corporation. As of January, 2017, it had a market share of 51% of the Indian
passenger car market. Maruti Suzuki manufactures and sells popular cars such as the Ciaz,
Ertiga, Alto, Swift, Celerio, Swift Dzire and Omni. The company is headquartered at New
Delhi. In February 2012, the company sold its ten millionth (ten million = one crore) vehicle
in India.

7.1 SWOT Analysis:

Strengths:
 Major strength of MUL is having largest network of dealers and after sales service
centres in the country

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

 Maruti Suzuki launched NEXA showrooms to cater to its premium cars market

Weaknesses:
 Inability to penetrate the international market

 Low interior quality inside the cars when compared to its players

 Employee management problems, Strikes have affected the company’s brand image
in the past.

Opportunities:
 Maruti can target tapping emerging markets across the world and building a global
brand
  MUL can start R&D on electric cars for a much better substitute of the fuel.

Threats:
 Government policies for the automobile sector across the world
 Launch of Hyundai’s H800 may result in the decline of Alto sales
 Intense competition from global automobile brands and cheaper brands can
hurt Maruti Suzuki's business

7.2 Porters Value Chain

Primary Activities:
Inbound Logistics:
 Vendors are linked through the Internet-based instructions.
 The JIT system has in the company from monthly scheduling to daily scheduling
of parts

Operations:
 Maruti Suzuki has implemented Production Management System
 manufacturing facility consists of fully integrated plants with flexible assembly
lines

Outbound Logistics:
 The Company has jointly developed with the Indian Railways, special Auto
Wagons, to support a high capacity, high speed and safe car transportation system.
 To support its export shipments, it commissioned a dedicated Roll-on Roll-off car
terminal at Mundra sea port in partnership with MPSEZL.

Marketing:
 Maruti Suzuki has been aggressively cutting prices of its models. The rationale
behind the price cuts is the focus on offering new upgraded vehicles at a low price
 The sales of spares, accessories and Automobile related services such as insurance
and finance serve as additional sources of revenue for the dealers.

Services:
  Many of the Service Stations are at remote locations where Maruti Suzuki does
not have dealers.
 The Company has used IT to enhance interface with the customer. It has deployed
a world class Dealer Management Solution across its vast network of dealers
throughout the country. The solution has helped dealer managements to access a
wide range of information about their operations, as also customer satisfaction and
feedback

Support Activities:
Firm Infrastructure:
• The Company has again been awarded ISO: 27001 Certification
• Maruti had adopted the Japanese management concept of Kaizen, or continuous
improvement.

Human Resource Management:

• The Company goes further and trains its dealers' and vendors' workforce.
• The Company strengthened the concept of Stay Interviews

Technological Development:
• Localization, development and testing of parts for existing and new models.
• Global sourcing and advanced sourcing to get the advanced technologies into India at
lower costs.

Procurement:
• Any improvement in the car in terms of technology and design, quality or cost must
essentially include the Company's vendors and their support.

7.3 Porters Generic Strategy:

Maruti Suzuki: Low Cost Product- Differentiated service
 • Maruti builds high wall of safety against competition by its competitive pricing,
pricing as low as possible.
• Maruti has also been a company that has strived for sustainable development in its
plants.

8. RENAULT-NISSAN

Renault Nissan Automotive India Private Limited is the Indian subsidiary of Renault Nissan.

8.1 SWOT Analysis:

Strengths:
• Wide customer base and loyalty.
• Strong Brand Association with Nissan and Mahindra which helps in global reach.
• High Profitability and revenue.

Weaknesses:
 Despite European market, it lacks penetration in Asian markets.

 Cases of Recall of cars are frequent.

 51,000 Units of Renault Kwid are recalled over faulty fuel system.

Opportunities:
 Growing Asian automobile industry.
 New model launches.
 Increasing demand for hybrid electric vehicle.

Threats:
 Competitive car manufacturers.

 Fuel fluctuations.

 Innovative features introduced in competitive brands which leads to product

differentiation.
8.2 Porters Value Chain:

8.3 Porter’s Generic Strategy:

Renault-Nissan: Cost Leadership

 Targets on emerging markets like India, Vietnam and China for low cost
manufacturing and capacity.
 Low cost business targets in India.
 Use of cross badging efficiently.
 Cross badging-Selling the same car under different brand names.
Example: Nissan Micra and pulse are essentially the same cars, with some cosmetic
differences, made in the same factories but sold under different names.
 9. INDUSTRY ANALYSIS

9.1 Porters five force model

Barriers to Entry
• Huge investment.
• Globalization affecting the car industry.
• Depends on consumer taste and trends.
• Taking consumer as well as the other business into confidence is a huge problem.
• Threats from established players in the market.

Threat of Substitutes
• Rather than looking at the threat of someone buying a different car, there is also need
to also look at the likelihood of people taking the bus, train to their destination.
• The higher the cost of operating a vehicle, the more likely people will seek alternative
transportation options.
• The price of gasoline has a large effect on consumers' decisions to buy vehicles.

Competitive Rivalry
• Highly competitive industries generally earn low returns because the cost of
competition is high.
• The competition has intensified - rebates, preferred financing and long-term
warranties have helped to lure in customers, but they also put pressure on the profit
margins for vehicle sales.
• New design is always a risky proposition for the car manufacturing company.

Bargaining Power of Suppliers

• The automobile supply business is quite fragmented.
• Many suppliers rely on one or two automakers to buy a majority of their
products.
 • The automobile manufacturer hold very little power.

Bargaining Power of Buyers

• The bargaining power of automakers are unchallenged.
• Consumers are very price sensitive.
• Consumers may become dissatisfied and began looking for alternatives.

9.2 PESTLE Analysis

Political
• Allows automatic approval for foreign equity investment up to 100% in the
automotive sector and does not lay down any minimum investment criteria.
• Indian government auto policy aimed at promoting an integrated, phased and
conductive growth of the Indian automobile industry.
• Lying emphasis on R&D activities carried out by companies in India by giving tax
deduction of up to 150% for in house research and R&D activities.

Economic
• The Indian economy has grown at 8.5% per annum.
• tax deduction of up to 150% for in-house research and R & D activities.

Social
• Since changed lifestyle of people, leads to increased purchase of automobiles, so
automobile sector have a large customer base to serve.
• Upward migration of household income levels.
• Indian customers are highly discerning, educated and well informed. They are price
sensitive and put a lot of emphasis on value for money.
• Preference for small and compact cars. They are socially acceptable even amongst the
well off.
• Preference for fuel efficient cars with low running costs.
Technological
• More and more emphasis is being laid on R & D activities carried out by companies
in India.
• Weighted tax deduction of up to 150% for in-house research and R & D activity.
• Technological solutions help in integrating the supply chain, hence reduce losses and
increase profitability.

Legal
• Legal provision relating to environmental population by automobiles.
• Legal provisions relating to safety measures.
• Indian government auto policy aimed at promoting an integrated, phased and
conductive growth of the Indian automobile industry.

Environmental
• Physical infrastructure such as roads and bridges affect the use of automobiles. If
there is good availability of roads or the roads are smooth then it will affect the use of
automobiles.
• With the entry of global companies into the Indian market, advanced technologies,
both in product and production process have developed.
• Few global companies have setup R &D centres in India.
 10. CONCLUSION

 The Indian Automotive Industry after de-licensing in July, 1991 has grown at a
spectacular rate of 17% on an average for last few years. The industry has now
attained a turnover of Rs. 1,65,000 crores (34 billion USD) and an investment of Rs.
50,000 crores. Over of Rs. 35,000 crores of investment is in pipeline. The industry is
providing direct and indirect employment to 1.31 crore people. It is also making a
contribution of 17% to the kitty of indirect taxes. The export in automotive sector has
grown on an average CAGR of 30% per year for the last five years. The export
earnings from this sector are 4.08 billion USD out of which the share of auto
component sector 1.8 billion USD Even with this rapid growth, the Indian
Automotive Industry’s contribution in global terms is very low. This is evident from
the fact that even though passenger and commercial vehicles have crossed the
production figure of 1.5 million in the year 2005-06, yet India’s share is about 2.37
percent of world production as the total number of passenger and commercial vehicles
being manufactured in the world is 66.46 million against the installed capacity of 85
million units. Similarly, export constitutes only about 0.3% of global trade.

  It is a well accepted fact that the automotive industry is a volume driven industry and
a certain critical mass is a pre-requisite for attracting the much needed investment in
Research and Development and New Product Design and Development. R&D
investment is needed for innovations which is the life-line for achieving and retaining
the competitiveness in the industry. This competitiveness in turn depends on the
capacity and the speed of the industry to innovate and upgrade. No nation on its own
can make its industries competitive but it is the companies which make the industry
competitive. The most important indices of competitiveness are the productivity both
of labor and capital

 Challenges:

1. Indian customer has been presented with a wide range of choices in automobiles,
to suit every requirement and budget.
2. Competition has meant that manufacturers' margins have been squeezed severely
and they are all under pressure to cut costs to be profitable and competitive.
3. Hindustan Motors (manufacturers of Ambassador and Contessa cars) already
faced trouble due to the declining sales of its car’s, as most customers prefer the
newer models available in the market.
4. Maruti has seen its market share decline rapidly due to its models being old and
jaded and is in addition facing labor problems in its plant.
5. The challenge before the industry is to figure out the strategy for survival and
growth. the industry must increase volumes in each segment to achieve lower cost
of manufacture.