fbl pankaj aswal great lakes institute of management”
TRANSCRIPT
Price Elasticity
Price War ProductDifferentiation
Interest Rate Risk
Competition
Link to emission norms
2 Wheeler High High High Low High Low
4 Wheeler High High High Medium High medium
Commercial vehicles Low Absent Low High Low High
0
100
200
300
400
500
600
700
2004 2005 2006 2007 2008 2009
MHCV
LCV
Total CV
CV Units Sold in 1000s
Bargaining Power of Suppliers
• Weak because there are many suppliers but only few CV OEM buyers
Bargaining Power of Buyers
• Weak as there are few sellers but plenty of customers
• No price wars
Threat of Substitutes
• Low as railway freight rates are very high
Threat of new Entrants
• Low as it is capital intensive industry
Company
• Less competition & low product differentiation
Joint Venture with Local Player like Ashok Leyland or Swaraj Mazda
Collaboration
Joint Venture
Subsidiary
Educated Labor
Consistent Industrial Policy
Access to port
Financial Incentives by Government
Approximately 7000-8000 INR savings per car only through tax relaxations
Select Partner looking to leverage
technology advantage
Decide objective, structure
& form of joint venture
Select cash cow product such as
trucks
Alternate production technology
Estimate Cost of Equipments
Estimate price of portfolio selected
CostingMarket &
competition analysis
Sales projections & distribution model
Technology transfer cost
Foreign exchange projection
Resource Planning & financial projections
Most Important, define EXIT STRATEGY
CV market sensitive to interest rate fluctuation
Cost of raw material like steel may increase manifolds
Long term trend reflects cyclic pattern
Financing rates may increase in future
Capacity expansion may be required
Cultural differences may lead to conflicts with partner
1) Anand Rathi Automobile Report2) SSKI India Research3) http://en.wikipedia.org/wiki/Joint_venture4) http://india-autonews.blogspot.com/2010/03/indian-commercial-vehicle-
market.html5) Fitch Ratings CV Report6) Cygnus Quarterly Performance Analysis
