PORTER'S FIVE FORCES ANALYSIS INDIAN AUTOMOBILE INDUSTRY SUBMIT UBMITTE TED D TO: DR. SHIKHA N. KHERA
PRESENTED B Y: ASHISH MENDIRATTA (MBA/13) BHARTI VIVEKANAND (MBA/14) MADHUR AGARWAL (MBA/23) RAVISH SINGH (MBA/39)
INDEX S.No.
1. 2. 3. 4.
Topic
Introduction to In Indian Automobile In Industry 2 Wheeler Industry Passenger Vehicle Industry Commercial Vehicle Industry
INDEX S.No.
1. 2. 3. 4.
Topic
Introduction to In Indian Automobile In Industry 2 Wheeler Industry Passenger Vehicle Industry Commercial Vehicle Industry
INDIAN AUTOMOBILE INDUSTRY
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 except in 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.
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.
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.
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%
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.
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
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 2 nd largest manufacturer of two wheeler 5 th largest manufacturer of commercial vehicles Largest manufacturers of tractors in the world 4 th largest passenger car market in Asia India is the 2 nd largest two-wheeler market in the world 11 th largest passenger car market in the world Expected to be the 7 th largest auto industry by 2016
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.
YEAR
2006-07
2007-08
2008-09
Passenger 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
200000 000000 800000 600000 400000 200000 0
2006-07 2007-08 2008-09
Global Production of Motor vehicles (cars and commercial vehicles) Year
Production
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
56,258,892 58,374,162 56,304,925 58,994,318 60,663,225 64,496,220 66,482,439 69,222,975 73,266,061 70,520,493 60,986,985
Vehicle production trend
SWOT ANALYSIS S
Strengths
W
Large domestic market. Sustainable labor cost advantage. Competitive auto component vendor base. Government incentives for manufacturing plants. Strong engineering skills in design etc.
O
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.
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.
T
Threats
Rising input costs. Rising interest rates. Cut throat competition
Two wheeler wheeler industry industry
Manufacturer
Sales
Hero Hero Hond Honda a Bajaj Auto Ltd. TVS Motors Others
41 % 27 % 18 % 14 %
Market Share Of Major Players In Two-wheeler Industry Sales 14% 41%
18%
27%
r B j j Aut Lt . TVS m t rs Oth rs
Types of Two-wheelers in India There are mainly three types of two-wheelers available in India: ± Motorcycles ± Scooters ± Scooterettes/Mopeds
Motorcycles in India Bajaj Auto Ltd
HERO HONDA
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 NX G * Hero Honda CBZ X-Treme *
Bajaj Avenger * Bajaj CT 100 * Bajaj Platina * Bajaj Discover DTSi * Bajaj Pulsar DTSi * Bajaj Wave * Bajaj Wind 125 * Sonic DTSi *
Kinetic Motor Company
Kinetic Aquila * Kinetic Boss * Kinetic Challenger * Kinetic Comet * Kinetic GF * Kinetic Stryker * Kinetic Velocity
VS MOTOR
Yamaha Motor India
*
TVS Apache * TVS Centra * TVS Fiero * TVS Star * TVS Victor *
Yamaha Crux S * Yamaha G5 * Yamaha Gladiator *
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
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
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
Threat of New Entrants LOW
P O R T E R ¶ S 5 F O R C E S A N A L Y S I S
Bargaining Power of CustomersHIGH
Rivalry Among FirmsHigh
Threat of Substitute ProductsLow to Moderate
Bargaining Power of Suppliers Low
Rivalry Among Firms HIGH 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.
Threat of New Entrants Low to Moderate Capital investment is very huge Sportsbikes entering in Indian market Harley Davidson launching in India
Threat of Substitute Products Low 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.
Bargaining Power of Suppliers Low 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.
Bargaining Power of Customer High 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.
PASSENGER VEHICLE INDUSTRY
Rankwise Largest Automobile Manufacturers in India by Sales 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.
Maruti Suzuki Tata Motors Hyundai Motors Mahindra GM Chevrolet Honda Toyota Ford Fiat Motors koda
P O R T E R ¶ S
Threat of New Entrants
5 F O R C E S A N A L Y S I S
Bargaining Power of Customers
Rivalry Among Firms
Threat of Substitute Products
Bargaining Power of Suppliers
Threat Of New Entrants 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.
Bargaining Power Of Customers 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.
Threat of Substitute Products Moderate India is famous for its two-wheelers (bikes and mopeds) and threewheelers. 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.
Bargaining Power of Suppliers 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.
Rivalry Among Firms 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.
Maruti Suzuki
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
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
SWOT ANALYSIS S
Strengths
W
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
O
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
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
T
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
INDIAN COMMERCIAL VEHICLE INDUSTRY
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%.
Threat of New Entrants ± Low to Moderate
P O R T E R ¶ S 5 F O R C E S A N A L Y S I S
Bargaining Power of CustomersLow to Moderate
Rivalry Among Firms- Low to Moderate
Threat of Substitute ProductsLow
Bargaining Power of Suppliers ± Low
Low - Moderate Threat of New Entrants
Its not easy to enter H&MCV market. New entrants can enter LCV market.
Bargaining Power of Suppliers
Low More number of suppliers. Threat of chinese suppliers.
Low - Moderate : As companies working in duopoly in most segments.
Bargaining Power of Buyers
Low No substitute product for commercial vehicles for road transport.
Threat of Substitute Products
Rivalry among Competitors Low - Moderate Less Players in market catering to large demand
TATA MOTORS
TATA MOTORS
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.
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.
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.
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).
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)
SWOT ANALYSIS S
Strengths
W
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.
O
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 superefficient, eco-friendly engines.
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.
T
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.
