Challenges to Indias Automobile Industry

Challenges to Indias travel fabricationIndustry OverviewSince the first elevator car rolled out on the streets of Mumbai ( hence Bombay) in 1898, the auto Industry of India has come a presbyopic way. During its early stages the railcar perseverance was overlooked by the then Government and the policies were profligately non favorable. The liberalization policy and various tax reliefs by the Govt. of India in new-fangled old age has made remarkable bushels on Indian locomote Industry. Indian auto application, which is currently comeing at the pace of most 18 % per annum, has perform a hot destination for man(a) auto players corresponding Volvo, Genneral motors.The self-propelling exertion is facing new and pressing challenges. Globalization, individualizations, digitalization and change magnitude rivalry argon pressing the face of the diligence. In increment, increasing sentry duty requirements and voluntary environmental commitments by the self-propelling in dustry countenance also contributed to the changes ahead. Size is no longer a stock-purchase warrant of victor. Only those companies that reveal new ways to make value give prosper in the future. The purpose of this paper is to present a short overview of the self-propelling industry today and highlight challenges facing the industry. Based on this perspective, around strategic methodology which enabling them to transform themselves for the competition.Automobile Industry in IndiaAutomobile Industry in India has witnessed a trem poleous growth in modern years and is all set to carry on the momentum in the foreseeable future. Indian railcar industry has come a long way since the first car ran on the streets of Bombay in 1898. Today, railway car welkin in India is one of the refer vault of heavens of the economy in terms of the avocation. straightaway and indirectly it employs to a greater extent than than 10 million people and if we add the act of people employed in the auto- lot and auto ancillary industry then the number goes even higher.The automobile industry comprises of heavy fomites (trucks, coaches, tempos, tractors) passenger cars and ii-wheelers. doughy vehicles section is look out ond by Tata-Telco, Ashok Leyland, Eicher travels, Mahindra and Mahindra, and Bajaj. The major car manufacturers in India be Hindustan Motors, Maruti Udyog, Fiat India Private Ltd., crossroad India Ltd., General Motors India Pvt. Ltd., Honda Siel Cars India Ltd., Hyundai Motors India Ltd., and Skoda India Private Ltd., Toyota Motors, Tata Motors and so on The superior players in the two-wheeler vault of heaven be Hero Honda, Bajaj, TVS, Honda Motorcycle Scooter India (Pvt.) Ltd., Yamaha etc.In the initial years after independence Indian automobile industry was plagued by unfavourable government policies. All it had to offer in the passenger car segment was a 1940s Morris model called the embassador and a 1960s Suzuki-derived model called the Mar uti 800. The automobile sector in India belowwent a metamorphosis as a direct of the liberalization policies initiated in the 1991. Measures much(prenominal)(prenominal)(prenominal) as relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and refining the banking policies played a vital role in routine around the Indian automobile industry. Until the mid 1990s, the Indian auto sector consisted of just a handful of local companies. However, after the sector receptive to foreign direct investment in 1996, spheric majors travel in. Automobile industry in India also received an unintended boost from stringent government auto emission regulations over the past a couple of(prenominal) years. This ensured that vehicles produced in India conformed to the standards of the developed world.Indian automobile industry has matured in last few years and offers differentiated merchandises for different segments of the society. It is currently reservati on inroads into the sylvan middle class mart after its inroads into the urban food marketplaces and awkward rich. In the recent years Indian automobile sector has witnessed a slew of investments. India is on e precise major orbiculate automobile players radar. Indian automobile industry is also fast becoming an outsourcing hub for automobile companies worldwide, as indicated by the zooming automobile exports from the country. Today, Hyundai, Honda, Toyota, GM, Ford and Mitsubishi have set up their manufacturing grips in India. Due to rapid economic growth and higher disposable income it is believed that the success story of the Indian automobile industry is not going to end soon.Some of the major characteristics of Indian automobile sector be number largest two-wheeler market in the world.Fourth largest commercial vehicle market in the world.11th largest passenger car market in the worldexpect to arrive the worlds third largest automobile market by 2030, behind only China a nd the US.Some facts on Automobile industry in IndiaIndia has the fourth largest car market in the worldIndia has the largest terzettosome wheeler market in IndiaIndia is the second largest producer of two wheelers in the worldIndia ranks twenty percent in the occupation of commercial vehicles.Hyundai Motors ranks second in car production in the world.Indian automobile industry manufacturing cars, buses, three wheelers, two wheelers, commercial vehicles, heavy vehicles, provides employment to a large number of workforce. The abolition of commissioned in 1991opened the doors for international automobile manufacturers. Some of the rise-known players of Indian automobile industry include Hindustan Motors, Maruti Udyog, Fiat India Private Ltd, Ford India Ltd., General Motors India Pvt Ltd, and Toyota Kirloskar Motor Ltd among separates. The production of automobiles in India is mainly for the home(prenominal) customers. Cars with 79% of automobiles in India, dominate the autom obile industry in India.The Challenge of Competitive EnvironmentThe roughly important question is how a caller-up house remain competitory in the face of the turbulent transformations taking place in the automotive industry. The key to success lies in existence focused, responsive, variable and resilient, which buns be accomplished by converting to anon read company. Adaptively to an ever-changing environment has become the core championship demand, requiring problem-solving tools and methods to be identified, selected and implemented quickly. Focused, responsive, variable and resilient are different behaviors required to become to a greater extent adap table behaviors whose features correspond with the exigencies of the line of descent objective. If you are hungry at lunch time, you leaveing responsively take a break so that you can afterwards again focus on your work. The vitamins in the salad you had for lunch feed you resilient against influenza. Thus you can varia bly adjust to different weather conditions on the way back root without catching a chill. Transforming this analogy to business, a car manufacturer has vii major strategic levers to enable such adaptive behavior.Market percentage Automobile industry of India can be broadly classified under passenger vehicles, commercial vehicles, three wheelers and two wheelers, with two wheelers having a supreme market mete out of more than 75%. Automobile companies of India, Korea, Europe and lacquer have a significant hold on the Indian market share. Tata Motors produces maximum numbers of mid and large size commercial vehicles, attribute more that 60% of the market share. Motorcycles top the charts of two wheelers with Hero Honda being the key player. Bajaj by far is the number one manufacturer of three wheelers in India.Passenger vehicle section is major ruled by the car manufacturers capturing over 82% of the rack up market share. Maruti since long has been the biggest car manufacture r and holds more that 50% of the entire market.Major Manufacturers in Automobile IndustryMaruti Udyog Ltd.General Motors IndiaFord India Ltd.Eicher MotorsBajaj AutoDaewoo Motors IndiaHero MotorsHindustan MotorsHyundai Motor India Ltd. olympian Enfield MotorsTelcoTVS MotorsDC DesignsSwaraj Mazda LtdGovernment has liberalized the norms for foreign investment and import of technology and that appears to have benefited the automobile sector. The production of total vehicles increased from 4.2 million in 1998- 99 to 7.3 million in the2003-04. It is likely that the production of such vehicles will exceed 10 million in next couple of the months.The industry has adopted the global standards and this was manifested in the increasing exports of the sector. After a momentary slump during 1998- 99 and 1999-00, such exports registered robust growth rates of wellhead over 50 per cent in 2002-03 and 2003-04 each to exceed two and- a-half times the export figure for 2001-02.The key factors behin d the upswingSales incentives, first appearance of new models as well as variants coupled with easy handiness of low cost finance with comfortable repayment options continued to messiness demand and sales of automobiles during the first two quarters of the current year. The take a chance of an increase in the interest rates, the impact of delayed monsoons on rural demand, and increase in the costs of inputs such as steel are the key concerns for the players in the industry.As the players continue to introduce new models and variants, the competition may intensify further. The ability of the players to contain costs and focus on exports will be critical for the performance of their respective companies.Key enquiry HighlightsPassenger car production in India is projected to cross three million units in 2014-15.Sales of passenger cars during 2008-09 to 2015-16 are expected to grow at a CAGR of around 10%.Export of passenger cars is evaluate to rise more than the domestic sales du ring 2008-09 to 2015-16.Motorcycle sales will perform positively in future, exceeding 10 Million units by 2012-13.Value of auto component exports is likely to attain a range of a function digit figure in 2012-13.Turnover of the Indian auto component industry is forecasted to surpass US$ 50 Billion in 2014-15.Automobile FeaturesProduction legers in automobile companies have grown by around 2% per year over the last 20 years however, its congress importance in terms of market value compared to other industry sectors has decreased significantly. Today the automobile industry represents less than 2% of the total European market capitalisation, while 20 years ago the sector was almost double in relative size.As a result of tough competition, product cycles have become shorter which creates a crowded market place with newer and fresher products. This also means that 1) the competitive advantage decimal point of a model, or technology, decreases, and 2) research development costs have to be covered more quickly.Recognising market movements first, or even creating them, is a key success factor for automobile companies. For example, early detection of the rising demand for hybrids was an important marketing move for Toyota, while other companies may be deputeing their hybrids when competition is already quite intense.Only about 1/4 of over 50 car manufacturers who were operating 40 years ago have been able to retain their economic independence. Despite this consolidation, overcapacity in the industry is a constant issue, keeping pricing and the return on invested capital under pressure when the cost of capital can much not be covered. A high fixed cost base ensures that companies follow a growth strategy. However, this does not mean more jobs in the sector, but rather that fewer employees in lower-cost countries have to produce more. long suit and Heavy Commercial VehiclesIndia is the fifth largest manufacturer of commercial vehicles in the world. transaction o f this sector during the last 4 years is given in the table below-The main manufacturers areTata Group (engines in collaborationism with Cummins)Ashok Leyland (in collaboration with IVECO, ItalyVolvo India Pvt. Ltd. (wholly-owned subsidiary of SwedenDefence Vehicle factory (in collaboration with MAN, GermanyOpportunities for Canadian companies in terms of exports, technology transfers, strategic alliances, pecuniary collaborations and JVsCNG buses Modification of engines and supply of kits. displace cell technology for busesBus body building including school bus bodiesHeavy duty trailersIndian automobile sector A well-off MarketDe-licensing in 1991 has put the Indian automobile industry on a new growth track, attracting foreign auto giants to set up their production facilities in the country to take advantage of various benefits it offers. This took the Indian automobile production from 5.3 Million Units in 2001-02 to 10.8 Million Units in 2007-08. The other reasons attracting global auto manufacturers to India are the countrys large middle class population, increment earning power, strong technological capability and availability of trained manpower at competitive prices.In 2006-07, the Indian automotive industry provided direct employment to more than 300,000 people, exported auto component worth around US$ 2.87 Billion, and contributed 5% to the gross domestic product. Due to this large contribution of the industry in the national economy, the Indian government lifted the requirement of forging joint ventures for foreign companies, which attracted global to the Indian market to establish their plants, resulting in heightened automobile production.Economic ProblemsThe problems go about by Indian manufacturers are similar to those battering Indian carmakers excessive production capacity a surging new competitor. And all of this is mishap at a time when the industry is focused on a process of outsourcing components. In summation, moving plants to Asi a has become a priority because of such factors as costs, flexibility and technology. Europe, in contrast, becomes a stumbling block to manufacturers because of its rigidities and the stagnating demand thither.The automotive industry currently faces huge challenges. The fundamental technological paradigm it relies on, volume production, has become progressively more unprofitable in the face of more and more segmented niche markets. At the akin time it faces increasing regulatory and social pressures to meliorate both the sustainability of its products and methods of production. Building on a wealth of research, The automotive industry and the environment addresses those challenges and how they can be met in producing a sustainable and profitable industry for the future.Hybrid cars require companies to spend more on research. The Indian automakers committed themselves to hybrid motors from the very first moment, and they have taken the lead in the market as a result. different ma nufacturers have entered this segment late, and they are now being forced to make a major disinvestment in this concept. Auto manufacturers are more disturbed about the environment, and that matters more and more to customers. As a result, they are dedicating more resources to investing in technology for adopting their vehicles. The Indian companies are the ones who have invested more in these devices for quite some time because of their culture of harmony with nature, and the measures obligate by the government.The Indian firms are gaining market share. Toyota, which does not face the same economic problems as its major rivals, hopes to oust from its spot as the worlds jumper lead automaker. To do that, Toyota is going to invest 10.13 cardinal Euros over the next few years.Already the Indian firm sells more vehicles in the Indian than any other manufacturer.On the one hand, its SUVs are losing market share. On the other hand, Ford is being affected by discount plans aimed at lu ring buyers. In addition to suffering high labor costs, it spends a great deal on healthcare and pensions for its workers. Finally, Ford is paying a price because Asian manufacturers are highly competitive.AUTOMOBILE TRENDSThe industry is mature, especially in the European and American markets, while some Asian markets (e.g. China and India) allay offer some growth. Overall, demand growth is likely to stay below the nominal GDP (Gross Domestic Product) expansion rate.Branding, technological leadership (especially in fuel economical propulsion technologies and safety) and consequently differentiation, as well as good provider relations will be the key success factors for the automobile company of the future.The regulatory focus on greenhouse gas emissions, as well as the increasingly tight regulations on air pollutants, is creating pressure for automakers to slim down fuel consumption, as well as emissions from internal combustion engines. The thin out is moving towards developin g drive trains based on new technologies such as hybrids and fuel cells.In all consumer markets, whether they are low-priced place goods, food, apparel, or cars, a clear polarization exists. On one attitude there are people who can afford to buy very expensive automobiles, while on the other, demand for low-cost vehicles is increasing. This trend can be expected to continue and car manufacturers have to ensure that they are not going to be lost in the middle.Finding SolutionsIn recent years, vehicle makers have gone from an environment in which the take aim of service and quality assured excellence while costs permitted them to guarantee profitability, to another environment that is more competitive and more global, and in which the business has become more complex.The problems faced by Tata Motors, the largest automobile company in India. In late January 2009, Tata Motors was reeling under a severe business and financial crisis. The company had acquired Jaguar and Land Rover (JL R) from the US-based Ford Motors for US$ 2.3 billion in June 2008. To finance the acquisition, Tata Motors raised a bridge loan of US$ 3 billion from a consortium of banks. By the end of January 2009, Tata Motors was even to pay around US$ 2 billion towards the bridge loan. Moreover, JLR inevitable further investments, that too quickly, to keep the operations running. Besides this, the commercial launch of Tata Motors small car Nano required much more time than anticipated.Those vehicle makers must ally themselves with suppliers, and work as a team to arrive solutions that add value and profitability. That way, collaboration becomes a strategic option that companies can utilize to improve their competitiveness and guarantee their survival. They can conserve resources, share risks, obtain information, access complementary resources, reduce the cost of developing products and improve their technology capabilities.With the Indian economy showing no signs of revival soon, there seeme d to be no immediate possibility of an increase in domestic demand. The Managing Director of the Tata Motors was left wondering if the worst was over for Tata Motors and what he should do to revive the companys performance.Issues Understand the impact of macroeconomic factors on the business. Analyze the recent developments in the global economy due to the ongoing sub-prime crisis and the resultant global financial turmoil. Study the effects of global economic slowdown and its impact on the global automobile industry. Critically analyze the problems faced by Tata Motors and suggest probable solutions.ConclusionToday tough challenges in automotive industry require finding in news ways to create value if they are to prosper to successfully adapt these lever companies will be able to respond to changes with focus, responsiveness, variability and resilience.Today, the world automobile industry accounts for 15 percent of the world gross domestic product and in future will continue to b e one of the worlds most important economic sectors. Despite the significant inroads that the transport sector has made into the world export market during the last decade, the sectors share in total India exports is still lower than the relative share of world exports of transport products.Lastly, the rise of global and regional production networks calls for an efficient transport infrastructure to enable India to become integrated into the network. The global networks require rapid and Just-in-time movement of components of the final product to be able to exploit the available comparative advantages of different locations. If a country does not provide the minimum standards of transport infrastructure, it would be excluded from the society in the network.BIBLIOGRAPHYhttp//www.surfindia.com/automobile/automobile-industry.htmlhttp//automobiles.mapsofindia.com/http//business.mapsofindia.com/automobile/http//www.woodheadpublishing.com/en/book.aspx?bookID=762http//search.yahoo.com/sea rch?p=%22In+addition+to+suffering+high+labor+costs%2Cit+spends+a+great+deal+on+healthcare+and+pensions+for+its+workers%22