porter's five forces analysis - indian automobile industry 2

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PORTER'S FIVE FORCES ANALYSIS INDIAN AUTOMOBILE INDUSTRY SUBMITTED TO : DR. SHIKHA N. KHERA PRESENTED BY : ASHISH MENDIRATTA (MBA/13) BHARTI VIVEKANAND (MBA/14) MADHUR AGARWAL (MBA/23) RAVISH SINGH (MBA/39)

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Page 1: Porter's Five Forces Analysis - Indian Automobile Industry 2

PORTER'S FIVE FORCES ANALYSIS

INDIAN AUTOMOBILE INDUSTRY

SUBMITTED TO:DR. SHIKHA N. KHERA

PRESENTED BY:ASHISH MENDIRATTA (MBA/13)BHARTI VIVEKANAND (MBA/14)MADHUR AGARWAL (MBA/23)RAVISH SINGH (MBA/39)

Page 2: Porter's Five Forces Analysis - Indian Automobile Industry 2

INDEX

S.No. Topic

1. Introduction to Indian Automobile Industry

2. 2 Wheeler Industry

3. Passenger Vehicle Industry

4. Commercial Vehicle Industry

Page 3: Porter's Five Forces Analysis - Indian Automobile Industry 2

INDIAN AUTOMOBILE

INDUSTRY

Page 4: Porter's Five Forces Analysis - Indian Automobile Industry 2

Automobile Industry• 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 Industry was delicensed in July 1991 with the announcement of the New Industrial Policy. The passenger car industry was, however, delicensed in 1993. No industrial licence is required for setting up of any unit for manufacture of automobiles exceptin 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.

• The cumulative production data for April-January 2010 shows production growth of 23.07 percent over same period last year.

Page 5: Porter's Five Forces Analysis - Indian Automobile Industry 2

• 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.

Page 6: Porter's Five Forces Analysis - Indian Automobile Industry 2

Automotive Industry

• The automotive industry is one of the most important economic sectors by revenue.

• The term automotive industry usually does not include industries dedicated to automobiles after delivery to the customer, such as repair shops and motor fuel filling stations.

Page 7: Porter's Five Forces Analysis - Indian Automobile Industry 2

Domestic Sales

Growth during April-January 2010 period:– Passenger Vehicles: 25.21%– Passenger Cars: 24.75%– Utility Vehicles:21.95%– Multi Purpose Vehicles: 37.05%– Overall Commercial Vehicles: 30.39%– Medium & Heavy Commercial Vehicles (M&HCVs):

20.58%– Light Commercial Vehicles: 39.66%– Two Wheelers: 23.74%– Mopeds: 31.73%– Scooters: 20.56%– Motorcycles: 24.32%

Page 8: Porter's Five Forces Analysis - Indian Automobile Industry 2

Exports

Growth during April-January 2010 period:– Overall Automobile exports: 13.24%– Passenger Vehicles segment: 33.92%– Two Wheelers segments: 8.84%– Commercial Vehicles segment: (-)7.52 percent.

Page 9: Porter's Five Forces Analysis - Indian Automobile Industry 2

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

Page 10: Porter's Five Forces Analysis - Indian Automobile Industry 2

India's Position in World's Production

• Well-developed, globally competitive auto ancillary industry• Established automobile testing and R&D centers• Among one of the lowest cost producers of steel in the

world• World's 2nd largest manufacturer of two wheeler• 5th largest manufacturer of commercial vehicles• Largest manufacturers of tractors in the world• 4th largest passenger car market in Asia• India is the 2nd largest two-wheeler market in the world• 11th largest passenger car market in the world• Expected to be the 7th largest auto industry by 2016

Page 11: Porter's Five Forces Analysis - Indian Automobile Industry 2

Worldwide Trends

• In 2007, worldwide production reached a peak at a total of 73.3 million.

• In 2009, worldwide motor vehicle production dropped 13.5% to 61 million. Sales in the U.S. dropped 21.2% to 10.4 million units.

• China became the world's largest motor vehicles market, both by sales as well as by production. Sales in China rose 45% in 2009 to 13.6 million units.

Page 12: Porter's Five Forces Analysis - Indian Automobile Industry 2

YEAR 2006-07 2007-08 2008-09Passenger vehicles 198,452 218,401 335,739

Commercial vehicles 49,537 58,994 42,673

Three-wheelers 143,896 141,225 148,074

Two-wheelers 619,644 819,793 1,004,174

Page 13: Porter's Five Forces Analysis - Indian Automobile Industry 2

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Page 14: Porter's Five Forces Analysis - Indian Automobile Industry 2

Global Production of Motor vehicles

(cars and commercial vehicles)Year Production

1999 56,258,8922000 58,374,1622001 56,304,9252002 58,994,3182003 60,663,2252004 64,496,2202005 66,482,4392006 69,222,9752007 73,266,0612008 70,520,4932009 60,986,985

Page 15: Porter's Five Forces Analysis - Indian Automobile Industry 2

Vehicle production trend

Page 16: Porter's Five Forces Analysis - Indian Automobile Industry 2

Strengths

• Large domestic market.• Sustainable labor cost

advantage.• Competitive auto component

vendor base.• Government incentives for

manufacturing plants.• Strong engineering skills in

design etc.

Opportunities

• Commercial vehicles: SC ban on overloading.

• Heavy thrust on mining and construction activity.

• Increase in the income level.

• Cut in excise duties.• Rising rural demand.

Threats

• Rising input costs.• Rising interest rates.• Cut throat competition

Weaknesses

• Low labor productivity.• High interest costs and high

overheads make the production uncompetitive.

• Various forms of taxes push up the cost of production.

• Low investment in Research and Development.

• Infrastructure bottleneck.

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SWOT ANALYSIS

Page 17: Porter's Five Forces Analysis - Indian Automobile Industry 2

Two wheeler industry

Page 18: Porter's Five Forces Analysis - Indian Automobile Industry 2

Manufacturer Sales

Hero Honda 41 %

Bajaj Auto Ltd. 27 %

TVS Motors 18 %

Others 14 %

Page 19: Porter's Five Forces Analysis - Indian Automobile Industry 2

Market Share Of Major Players In Two-wheeler Industry

41%

27%

18%

14%

Sales

Hero HondaBajaj Auto Ltd.TVS motorsOthers

Page 20: Porter's Five Forces Analysis - Indian Automobile Industry 2

Types of Two-wheelers in India

There are mainly three types of two-wheelers available in India:

– Motorcycles– Scooters– Scooterettes/Mopeds

Page 21: Porter's Five Forces Analysis - Indian Automobile Industry 2

Bajaj Auto Ltd HERO HONDA

* Bajaj Avenger* Bajaj CT 100* Bajaj Platina* Bajaj Discover DTSi* Bajaj Pulsar DTSi* Bajaj Wave* Bajaj Wind 125* Sonic DTSi

* Hero Honda Achiever* Hero Honda CD Dawn* Hero Honda CD Deluxe* Hero Honda Glamour* Hero Honda Glamour-Fi* Hero Honda Karizma* Hero Honda Passion Plus* Hero Honda Pleasure* Hero Honda Super Splendor* Hero Honda Splendor NXG* Hero Honda CBZ X-Treme

Kinetic Motor Company TVS MOTOR Yamaha Motor India

* Kinetic Aquila* Kinetic Boss* Kinetic Challenger* Kinetic Comet* Kinetic GF* Kinetic Stryker* Kinetic Velocity

* TVS Apache* TVS Centra* TVS Fiero* TVS Star* TVS Victor

* Yamaha Crux S* Yamaha G5* Yamaha Gladiator

Motorcycles in India

Page 22: Porter's Five Forces Analysis - Indian Automobile Industry 2

Scooters in India

• The scooter and the scooterette share in the Indian two wheeler market is 13.4%.

• The main models available in India are:– Bajaj Chetak– Honda Eterno– Kinetic Blaze– LML NV SPL– LML Select II

Page 23: Porter's Five Forces Analysis - Indian Automobile Industry 2

Scooterettes/Mopeds• TVS Motors launched India's first 50cc, 2 seater moped: TVS Moped 50.• TVS also launched India's first indigenous scooterette: Scooty in 1994.• This segment has about one-fourth share in the Indian two wheeler

industry.• The major models available in India are:

– Bajaj Wave– Bajaj Kristal DTSi– Bajaj Blade DTSi– Hero Honda Pleasure– Kinetic Kine– Kinetic 4S– Kinetic Nova– Kinetic Zoom– Kinetic V2 Range– Kinetic King 100– Kinetic Luna Super– Kinetic Luna TFR– Yo Smart– Honda Dio– Honda Activa– TVS Scooty– TVS XL

Page 24: Porter's Five Forces Analysis - Indian Automobile Industry 2

Factor which influence the growth of two-wheeler industries are as follows: • Lower interest rates • Easing liquidity situation • Modernization of young generation • A well-equipped middle- class transport • Fuel-Efficient

Page 25: Porter's Five Forces Analysis - Indian Automobile Industry 2

Rivalry Among

Firms- High

Threat of New Entrants

- LOW

Bargaining Power of

Suppliers - Low

Threat of Substitute

Products- Low to Moderate

Bargaining Power of

Customers- HIGH

PORTER’S 5 FORCES ANALYSIS

Page 26: Porter's Five Forces Analysis - Indian Automobile Industry 2

Rivalry Among FirmsHIGH

• The key players in two-wheeler industries are Hero Honda motor ltd. (HHML), Bajaj Auto ltd and TVS motor Company ltd. The other players are Kinetic, LML, Yamaha, Majestic auto ltd, Royal Enfield ltd and Honda motorcycle & scooter India.

• Two-wheelers domestic market growth rate for 2008-09 is 19.4% which is very high when compared to that of three wheelers, Passenger and commercial vehicles.

• Indian Auto policy 2002 gives added advantage to two-wheeler manufacturers to enter even other countries outside India.

• Since big manufacturer plant with high technology and good R&D team needed many of them dose not enter in two-wheeler Industries. Only the companies which are in automobile line will expand their product line like Mahindra.

Page 27: Porter's Five Forces Analysis - Indian Automobile Industry 2

Threat of New EntrantsLow to Moderate

• Capital investment is very huge • Sportsbikes entering in Indian market• Harley Davidson launching in India

Page 28: Porter's Five Forces Analysis - Indian Automobile Industry 2

Threat of Substitute ProductsLow to Moderate

• Substitute products for two-wheeler industries are bus transportation, Auto transportation and even low-end cars, but people using two-wheelers can only use the service of buses and auto as a substitute product.

• Sometimes low-end car is a substitute product for the people using high-end motorcycles.

• Normal buses to hi-tech ac buses which is threat to two-wheeler industry.

• Penetration of Metro trains in Metropolitans.

Page 29: Porter's Five Forces Analysis - Indian Automobile Industry 2

Bargaining Power of SuppliersLow

• Some of the components in two-wheeler industry are very common for all the two-wheeler industries like steel, aluminum, tyres and tubes, these material are available in abundant. This makes them to drive a smooth production of their finished products.

Page 30: Porter's Five Forces Analysis - Indian Automobile Industry 2

Bargaining Power of CustomerHigh

• Buyer has added advantage than seller because there are five to six big popular brands of two-wheelers are available in India, so that they can switch brand from one another.

• Buyers are very conscious in spending their money to purchase two-wheeler, because it attracts most of the middle-income group’s seller cannot price their product very high.

Page 31: Porter's Five Forces Analysis - Indian Automobile Industry 2

PASSENGER VEHICLE INDUSTRY

Page 32: Porter's Five Forces Analysis - Indian Automobile Industry 2

Rankwise Largest Automobile Manufacturers in India by

Sales1. Maruti Suzuki2. Tata Motors3. Hyundai Motors4. Mahindra5. GM Chevrolet6. Honda7. Toyota8. Ford9. Fiat Motors10. Škoda

Page 33: Porter's Five Forces Analysis - Indian Automobile Industry 2

Rivalry Among Firms

Threat of New

Entrants

Bargaining Power of Suppliers

Threat of Substitute Products

Bargaining Power of

CustomersPORTER’S 5 FORCES ANALYSIS

Page 34: Porter's Five Forces Analysis - Indian Automobile Industry 2

• 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.

Threat Of New Entrants

Page 35: Porter's Five Forces Analysis - Indian Automobile Industry 2

• 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.

• 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.

Bargaining Power Of Customers

Page 36: Porter's Five Forces Analysis - Indian Automobile Industry 2

• Moderate• India is famous for its two-wheelers (bikes and mopeds) and

three-wheelers. These are very real and obvious threats to auto manufacturers.

• 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.

Threat of Substitute Products

Page 37: Porter's Five Forces Analysis - Indian Automobile Industry 2

• Low to Moderate• It is likely that the suppliers to the manufacturers have

considerable bargaining power. They are not held ransom by one single manufacturer as they can market their products to any of the others in India.

• In the relationship between the 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.

Bargaining Power of Suppliers

Page 38: Porter's Five Forces Analysis - Indian Automobile Industry 2

• High• The industry is not yet in its shake-out phase and is still

struggling to find the up-and-coming stars and possibly topple the leaders.

• 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 being product being matched in a few months 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.

Rivalry Among Firms

Page 39: Porter's Five Forces Analysis - Indian Automobile Industry 2

Maruti Suzuki

Page 40: Porter's Five Forces Analysis - Indian Automobile Industry 2

Maruti Suzuki

• Founded in 1981 as Maruti Udyog Limited (MUL)• Suzuki Motor Corporation of Japan holds a majority stake

(54.2%) in the company.• On 17 September 2007, Maruti Udyog Limited was

renamed Maruti Suzuki India Limited.• It is the largest automobile manufacturer in South Asia.• It was the first company in India to mass-produce and sell

more than a million cars.• Revenues of $4.8 billion in 2009-10

Page 41: Porter's Five Forces Analysis - Indian Automobile Industry 2

Company History

• 1983 : Maruti 800, a hatchback, India’s first affordable car, is released in the market.

• 1984 : Installed capacity of the plant in Gurgaon, reaches 40,000 units

• 1987 : The company's first export, when a lot of 500 cars were sent to Hungary.

• 1989 : Maruti 1000, India’s first contemporary sedan is released into the market

• 1994 : Esteem LX released in market, Maruti's second sedan model

• 1996 : 5 new models launched• 2000 : New Alto model released• 2003 : Enters into partnership with State Bank of India• 2005 : The fiftieth lakh (5 millionth) car rolls out in April

Page 42: Porter's Five Forces Analysis - Indian Automobile Industry 2

Strengths

• Brand Image• Experience in Indian market • Established distribution & after sales

service network• Understanding of Indian Market• Ability to design products with

differentiating features• Experience and knowhow in

technology

Opportunities

• Mergers & Acquisitions• Innovation• Product and services expansion• Increased purchasing power of

Indian middle class category• Government subsidies• Prospective buyers from the two-

wheeler segments• Foreign collaboration

Threats

• Competition• Cheaper technology• External changes (government,

politics, taxes, etc.)• Lower cost competitors or imports• Price wars• Competition from second hand cars

and Tata Nano

Weaknesses

• Not diversified• Lack of experience with the foreign

market• Inexperience with foreign workforce• Comparatively new to diesel car

segment• People resistant to upper segment

models

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SWOT ANALYSIS

Page 43: Porter's Five Forces Analysis - Indian Automobile Industry 2

INDIAN COMMERCIAL VEHICLE INDUSTRY

Page 44: Porter's Five Forces Analysis - Indian Automobile Industry 2

Structure of the Indian CV Industry

• The CV industry in India is split between the LCV and M&HCV segments. • GVW less than 7.5 tonnes are classified as LCVs.• The ones heavier than these are termed M&HCVs. • In terms of usage, CVs may be categorised as goods carriers and

passenger carriers. • The overall CV industry is split between the LCV and M/HCV segments

roughly in the ratio of 45:55. • Around 13% of the vehicles sold in the LCV as well as the M/HCV segment

are passenger carriers. • Most market segments of the Indian CV industry currently operate as

duopolies, with the top two players’ together accounting for a market share of over 85%.

Page 45: Porter's Five Forces Analysis - Indian Automobile Industry 2
Page 46: Porter's Five Forces Analysis - Indian Automobile Industry 2

Rivalry Among Firms-

Low to Moderate

Threat of New Entrants –

Low to Moderate

Bargaining Power of

Suppliers – Low

Threat of Substitute

Products- Low

Bargaining Power of

Customers- Low to Moderate

PORTER’S 5 FORCES ANALYSIS

Page 47: Porter's Five Forces Analysis - Indian Automobile Industry 2

Low - Moderate • Its not easy to enter

H&MCV market.• New entrants can

enter LCV market.

Threat of New

Entrants

Page 48: Porter's Five Forces Analysis - Indian Automobile Industry 2

Low• More number of suppliers.• Threat of chinese

suppliers.

Bargaining Power of Suppliers

Page 49: Porter's Five Forces Analysis - Indian Automobile Industry 2

Bargaining Power of

Buyers

Low - Moderate : As companies working in duopoly in most segments.

Page 50: Porter's Five Forces Analysis - Indian Automobile Industry 2

Threat of Substitut

e Products

Low No substitute product for commercial vehicles for road transport.

Page 51: Porter's Five Forces Analysis - Indian Automobile Industry 2

Rivalry among Competitors Low - Moderate

• Less Players in market catering to large demand

Page 52: Porter's Five Forces Analysis - Indian Automobile Industry 2

TATA MOTORS

Page 53: Porter's Five Forces Analysis - Indian Automobile Industry 2

TATA MOTORS

Page 54: Porter's Five Forces Analysis - Indian Automobile Industry 2

TATA MOTORS

• India's largest automobile company, with revenues of Rs. 92,519 crores in 2009-10.

• India’s largest Commercial vehicle manufacturer.• Third largest passenger vehicle manufacturer in India. • The company is the world's fourth largest truck manufacturer, and the

world's second largest bus manufacturer.

Page 55: Porter's Five Forces Analysis - Indian Automobile Industry 2

COMPANY HISTORY

• Established in 1945 as TELCO. • Its first vehicle rolled out in 1954 in collaboration with Daimler Benz.

• 1969 : Tata’s first truck rolled out after ending collaboration with Daimler Benz.

Page 56: Porter's Five Forces Analysis - Indian Automobile Industry 2

• 1986 : Production of first light commercial vehicle, Tata 407.• 1991 : Launch of the 1st passenger car Tata Sierra.• 1994 : Launch of Tata Sumo - the multi utility vehicle.• 1994 : Joint venture agreement signed with M/s Daimler - Benz for

manufacture of Mercedes Benz passenger cars in India.• 1995 : Mercedes Benz car E220 launched.

Page 57: Porter's Five Forces Analysis - Indian Automobile Industry 2

• 1998 : Tata Safari - India's first sports utility vehicle launched.

• 1998 : Indica, India's first fully indigenous passenger car launched.

• 2002 : Introduced its sedan Tata Indigo.

• 2003 : Tata Engineering formally changes to Tata Motors.

• First company from India's engineering sector to be listed in NYSE(September 2004).

Page 58: Porter's Five Forces Analysis - Indian Automobile Industry 2

• 2004 : Tata Motors acquires Daewoo Commercial Vehicle, South Korea.

• 2004 : Tata Motors starts its globalization drive and launches Tata Indica in South Africa.

• 2008 : Launch of Tata Nano, a People’s Car (Rs. 1 Lakh only)

Page 59: Porter's Five Forces Analysis - Indian Automobile Industry 2

Strengths

• Wide variety of offerings from low end cars to SUVs for the Indian market.

• Strong brand recognition amongst truckers and transportation firms

• This also implies a wide network of support facilities, making them cheaper to run and maintain than many.

• The company has had a successful alliance with Italian mass producer Fiat since 2006.

Opportunities

• Nano is the cheapest car in the World - retailing at little more than a motorbike.

• The new Land Rover and Jaguar models will help gaining share in luxury segment.

• The new global track platform is about to be launched from its Korean (previously Daewoo) plant.

• The range of Super Milo fuel efficient buses are powered by super-efficient, eco-friendly engines.

Threats

• Other competing car manufacturers have been in the passenger car business for 40, 50 or more years.

• Sustainability and environmentalism could mean extra costs for this low-cost producer.

• Other players developing luxury cars targeted at the Indian market include Ford, Honda, Toyota and Volks Wagon.

• Rising diesel prices in Global Market.

Weaknesses

• The company's passenger car products are based upon 3rd and 4th generation platforms.

• Tata has not got a foothold in the luxury car segment in its domestic, Indian market.

• Customer’s perceive TATA as commercial vehicle manufacturers.

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SWOT ANALYSIS

Page 60: Porter's Five Forces Analysis - Indian Automobile Industry 2

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