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The   
designs, develops, manufactures, markets, and sells the world's motor
vehicles. It is one of the most important economic sectors by revenue.V This sector comprises of
Original Equipment Manufacturers (OEMs) and auto component manufacturers. The industry
encompasses commercial vehicles, multi-utility vehicles, passenger cars, two wheelers, three
wheelers and auto components.

The highlighting features of global automotive industry are:

^V Offers support to other industries such as iron, steel, rubber, glass, plastic, petroleum,
textiles, oil & gas, paints & coatings, transportation industries.
^V àising foreign investments have led to the rapid growth in terms of automobile
production and exports. Overseas companies are making huge investments and are
installing extensive production capacities in developing countries.
^V £ontinuous investment in research & development has resulted in increased productivity
and better quality automobiles, automotive accessories and parts.
^V Increase in standards of living and purchasing power parity have resulted in the increase
demand of automobiles especially four-wheelers in developing nations, mostly in South
Asian region.
^V This sector provides employment to major chunk of human population in the world i.e.
25 million. This industry not only provides millions of jobs to the people, but also
produces billions of dollars in terms of worldwide revenues.
^V Adequate infrastructural facilities in form of power supply, machinery, capital, ready
availability of raw materials and labor help in the tremendous growth of this industry.

ÿ 

The first practical automobile with a petrol engine was built by Karl Benz in 1885. Benz was
granted a patent for his automobile on 29 January 1886, and began the first production of
automobiles in 1888, after Bertha Benz, his wife, had proved with the first long-distance trip in
August 1888 - from Mannheim to Pforzheim and back - that the horseless coach was absolutely
suitable for daily use.

Soon after, Gottlieb Daimler and Wilhelm Maybach in Stuttgart in 1889 designed a vehicle from
scratch to be an automobile, rather than a horse-drawn carriage fitted with an engine. They also
are usually credited as inventors of the first motorcycle in 1886, but Italy's Enrico Bernardi, of
the University of Padua, in 1882, patented a 0.024 horsepower (17.9 W) 122 cc (7.4 cu in) one-
cylinder petrol motor, fitting it into his son's tricycle, making it at least a candidate for the first
automobile, and first motorcycle Bernardi enlarged the tricycle in 1892 to carry two adults.

›     



The global automotive component industry is highly diverse and comprises of various product
segments like engine parts, drive transmission and steering parts, suspension & braking parts,
electrical parts and other auto components parts. Few of these parts are either manufactured by
the suppliers and supplied to the OEM¶s who in turn assemble the parts and design and
manufacturers the engines and finally form the end product which are the automobile like
vehicles like passenger cars, utility vehicles, commercial vehicles, two-wheelers, three-wheelers
and tractors etc. depending upon company these things may vary. Hence we can imagine the
amount of potential in B2B sales this industry has provided. However in this report we shall
consider the analysis of only the end product which is automobile vehicles.

  



^V Î ›   
United States, Japan, £hina, Germany and South Korea are the top five automobile
manufacturing nations throughout the world. The United States of America is the world's largest
producer and consumer of motor vehicles and automobiles accounting for 6.6 million direct and
spin-off jobs and represents nearly 10% of the $10 trillion US economy. Automobile is one of
the important industries in the world, which provides employment to 25 million people in the
world.

    


  

The current global crisis has reshuffled the positions of the players on the global canvas. The
giants of the industry are facing problems such as bankruptcies, and others are being forced to
reduce their global output by more than one-third. As a consequence, there is going to be a
reduction in capital expenditure by foreign car makers in emerging markets. Under various
stimulus packages, governments around the globe have laid stressed upon environment-friendly
vehicle incentivizing for both customers and manufacturers. While there has been a correction in
nearly all markets, emerging automotive markets are expected to be more resilient and continue
to gain more importance on the global stage

^V  ›   
The automobile industry in India happens to be the ninth largest in the world. Following Japan,
South Korea and Thailand, in 2009, India emerged as the fourth largest exporter of automobiles.

The automotive industry in India produces a wide range of vehicles like passenger cars, utility
vehicles, commercial vehicles, two-wheelers, three-wheelers and tractors. £urrently, there are
approximately 15 manufacturers of passenger cars and utility vehicles, 9 manufacturers of
commercial vehicles, 16 manufacturers of two-wheelers and three-wheelers and 14
manufacturers of tractors.

Several Indian automobile manufacturers have spread their operations globally as well, asking
for more investments in the India automobile sector by the MN£s. Indian auto industry, which is
currently growing at the pace of around 18% per annum, has become a hot destination for global
auto players like Volvo, General motors and Ford. The Indian automobile industry is going
through a phase of rapid change and high growth. With new projects coming up on a regular
basis, the industry is undergoing technological change. The major players are expanding their
plants and focusing on mass customization, mass production etc. It is now the eleventh largest
manufacturer of passenger cars, fourth largest manufacturer of commercial vehicles and the
second largest manufacturer of two-wheelers in the world.

 
 

Imports have decreased substantially over the past decade. The most notable decline in imports
can be seen in the commercial vehicles segment. This can be attributed mainly to a substantial
increase in production capacities of commercial vehicles in India from 2000±2001 onwards.
Imports of passenger cars declined between 1996±1997 and 2000±2001. This was due to the
expansion of manufacturing facilities of cars in India during the period.

However, imports of passenger cars have increased in recent years. Growth in passenger car
imports took place between 2001±2002 and 2005±2006 due to increase in demand for premium
and luxury cars.

Some of the Largest Manufacturers in each segment within the automotive industry including
both the domestic and foreign manufacturers are as follows:

·       


   
Maruti Ashok Hero Bajaj Auto
Suziki Leyland Honda

Tata Motors Tata Motors Bajaj Auto Piaggio


M&M Eicher Motors TVS M&M
Hindustan Swaraj Mazda àoyal TVS Motors
Motors Enfield
Honda Volvo Kinetic Tata Motors
Motors
Toyota MAN LML India Force Motors
Volkswagen ITE£ Suzuki -
Motors
General Scania Yamaha -
motors Motors
Ford Mercedes- - -
Benz
Audi Hyundai - -

   
 

While the automotive industry in India started developing in the 1940s, distinct growth rates
started only in the 1970s. £ars were considered ultra luxury products, manufacturing was strictly
licensed, expansion was limited and there was a restrictive tariff structure. The decade 1985 to
1995 saw the entry of Maruti Udyog in the passenger car segment in collaboration with Suzuki
of Japan, and Japanese manufacturers in the two-wheeler and commercial vehicle segments.
After economic reforms took place in India in 1991, it is only in the mid-1990s, that the
automotive industry started opening up. Thus, the mid-1990s are characterized by the entry of
global automotive manufacturers through joint ventures in India.

Till the 1990s, the automotive industry in India was primarily dominated by Maruti Suzuki, Tata
Motors, Hindustan Motors and Premier Padmini in the passenger car segment. Ashok Leyland,
Tata Motors and Mahindra & Mahindra dominated the commercial vehicle segment while Bajaj
Auto dominated the two-wheeler segment.

After the year 2000, further policy changes were introduced and focus on exports in the industry
started increasing. Following that, the £ore Group on Automotive àesearch & Development
(£Aà) was set up in the year 2003 to identify priority areas for àesearch and Development
(à&D) in India.2
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The Indian passenger car market is known to be one of the most price sensitive car markets in the
world. The small car sub-segment is hotly contested by several car makers. India is the third
largest producer of small cars in the world after Brazil and Japan. Small cars account for 71 per
cent of the domestic market of passenger cars.

Global automotive majors such as Hyundai and Suzuki already have establishments to produce
small cars in India, and companies like Honda, Ford, àenault, and Volkswagen are finalizing
their small car plans. For instance, Toyota has announced plans of setting up a new small car
manufacturing plant by 2010 with an annual production capacity of 100 000 units.23 Tata
Motors is launching a car called Nano by end 2008, priced at USD 2 500 making it the world¶s
cheapest car. Given the current projections for the Nano, India can become the world¶s second
largest market for small cars soon. India¶s second largest motorcycle manufacturer, Bajat Auto is
also bringing out a small car by 2010±2012 in collaboration with àenault and Nissan in the same
price range.

 
 
 
 
 
   
 

  

^V Export of automotive components to ASEAN, BàI£, EU and USA for OEMs as well as
Aftermarket.
^V Booming Automobiles (Particularly cars) second sales and remodeling.
^V Increased deployment of IT-enabled Automobile support systems like GPS,ABS,ASà
and Safety systems
^V uality £ertification (Deming, Six Sigma, TM, TS16949) amongst suppliers have
attained critical mass and the entire market will follow to get quality certifications.
^V Alternate fuel (Bio fuel, electricity) and environment friendly green engines (Bharat
emission norms)
^V £ompact cars account for 70% of the total car market (an emerging market segment in
India with £ompact car sales increasing at about 20% each year).
^V Excise duty on small cars slashed from 24% to 12% in last three years (i.e. increasing in
government support pertaining to favoring political factor in Environmental analysis).

·    

Michael Porter identifies five forces that influence an industry. These forces specific to
automobile industry can be analyzed as follows:

^V

 

Despite the high concentration ratio seen in the automotive sector, rivalry in the
Indian auto sector is intense due to the entry of foreign companies in the market. The
industry rivalry is extremely high with any product being matched in a few monts by the
competitors. This instinct of the industry is primarily driven by technical capabilities
acquired over years of gestation under the technical collaboration with international
players.
^V 
    
The threat of substitutes to the automotive industry is fairly mild. Numerous other
forms of transportation are available, but none offer the utility, convenience,
independence and value offered by automobiles. The switching cost associated with using
a different mode of transportation, may be high in terms of personal time, convenience
and utility.
^V 




The barriers to enter automotive industry are substantial. For a new company, the
startup capital required to establish manufacturing capacity are substantial, establishing
companies are entering the new markets through strategic partnerships or through buying
out or merger 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.
^V 
  

In the relationship between the automotive industry and its suppliers, the power
axis is tipped in industry¶s favor. The industry is comprised of powerful buyers who are
generally able to dictate their terms to the suppliers.
^V  


In the relationship between the automotive 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.

   



£osts, infrastructure and human resource development are the underlying concerns in the
automotive industry and manufacturers are being challenged on these counts. Labour costs are
rising and economies of infrastructural improvements are not being realized efficiently.
£ompanies are searching for technological advancements that can help contain costs of
production and help in using resources efficiently to increase overall productivity.


 



£ontinued investment in infrastructure is essential for India to be able to realize the targets set in
the AMP. There are inadequate ports, insufficient feeder rail lines to the ports, and bad roads.
Despite the bottlenecks in this regard there are companies that have made the most out of the
existing infrastructure. For instance, Hyundai has setup its factory very strategically near the port
in £hennai and has built a supply chain hub around surrounding areas. It has now become the
second largest passenger car manufacturer in India after entering the Indian market in 1998.

àoads, àailways, Ports, Power etc are essential««««..

     


³To emerge as the destination of choice in the world for design and manufacture of automobiles
and auto components with output reaching a level of USD 145 billion accounting for more than
10 per cent of GDP and providing additional employment to 25 million people by 2016´ is the
vision put forward by the Ministry of Heavy Industries and Public Enterprises. Going forward it
is evident that the automotive industry in India offers immense potential in terms of sales and
employment opportunities.

Growth in the economy is expected to continue which is also going to help the automotive
industry to expand. àising disposable incomes and the new wave of consumerism arising out of
it are going to be key drivers. Foreign direct investments are pouring into India in large numbers
and manufacturing companies including global majors are going to setup manufacturing facilities
first and then develop à&D services, both on a large scale.

£ompanies are confident that productivity can be increased through low cost automation and
management efficiency. After productivity, the major concern among manufacturers is the
relatively poor infrastructure in the country. The slow pace of development of roads, railways
and ports is a disadvantage, but continuous improvements are being made in this regard also.

The automotive industry in India has been crossing record milestones and is one of the world¶s
fastest growing markets. The strengths of the Indian economy ± large pool of skilled human
resources, high quality engineering skills, strategic position combined with the strong growth
trends in the economy and vast investments by global companies, are expected to drive the
automotive industry to great heights.


  

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