Porter’s Five Forces Analysis: Automotive

Bargaining power of Buyers:

This is moderately high in the automotive industry. There are a lot of companies in India offering
automotives offering the same number of differentiated products and the buyers are in a better
position in terms of bargaining for better prices. They can easily switch to a different brand if they
want as there are almost negligible switching costs. Large corporations and the government also
require a large number of vehicles and hence are in a stronger position. Brands try to focus more on
attracting more customers by consistently producing better products at reasonable prices. During
COVID automobile sale went down drastically and the hike in lending rates by the Central Bank on
May 4,2022 may affect the bargaining power of buyers more. Since automotive loans may be more
expensive buyers may start depending more on public transport which may be comparatively
cheaper. This may force the automotive industry to accordingly change their prices hence making
the bargaining power of buyers stronger.

Bargaining power of suppliers:

This is low in this industry. There are a lot of suppliers in this industry present under the ACMA in the
organized sector. There also numerous suppliers in the unorganized sectors. The companies can also
import the parts from countries India has free trade policies with like Japan, South Korea and
Thailand. Considering contribution of suppliers in terms of cost and quality, it is pretty significant
however the amount of alternatives present to the companies, it doesn’t extend the buying power
of suppliers much.

Rivalry among Existing Competitors:

There is high rivalry. The introduction of foreign companies has also accelerated this rivalry as they
have started catering to the needs of the Indian market and changing their products accordingly.
With the Make in India campaign also, there is expected to be a rise in the number of competitors.
Due to the high bargaining power of buyers, there has also been an increase in the rivalry and
incentivized the company to further roll out better products with new features.

Threat of Substitute products:

This is moderate as there are no such substitutes to the automotive industry except for public
transport. There has been a fuel price hike and the prices have been affected significantly due to the
pandemic. The new hike in lending rate by the central bank of India is also adding to this threat.
Public transport is still not completely developed in all parts of India yet so there is some time before
it completely overtakes the automotive industry.

Threat of New entrants:

This is moderately low. A large amount of capital and knowledge is required to enter this industry.
There has also been a large amount of brands which are already established in India and It would be
comparatively difficult to enter this market and profit. Due to the pandemic also, the threat of new
entrants would be very low as not many sectors profited except for maybe healthcare. Since
switching costs for the customers aren’t very high either, new entrants would face a lot of issues in
establishing their brands without a preexisting customer base.