PESTLE ANALYSIS ON AUTOMOBILE INDUSTRY IN INDIA

BY-MANISH BADHIYE

IntroductionAUTOMOBILE SECTORMainly engaged in manufacturing motor vehicles or motor

vehicle engines.Primary activities are:

Motor cars manufacturing Motor vehicle engine manufacturing

Major products and services are:Passenger motor vehicle (Passenger Cars, Utility Vehicles & Multi

Purpose Vehicles) Commercial Vehicles (Medium & Heavy and Light )Two Wheelers and Three Wheelers

Landmark of Indian automobile industry

1897 First person to own a car in India–Mr. Foster of  Crompton Greaves Company, Mumbai

1901 First Indian to own a car in India - Jamsetji Tata1905 First Woman to drive a car in India -

Mrs.Suzanne RD Tata1945 Tata Motors1947 Mahindra & Mahindra Limited1948 Ashok Motors1981 Maruti Suzuki

1994 Mercedes-Benz1995 Ford Motor Company1996 Hyundai Motor Company2005 BMW2007 Audi2009 Land Rover and Jaguar

TOP 10 AUTOMOBILE COMPANIES IN INDIA

PESTLE ANALYSIS POLITICAL In 2002, the Indian government formulated an auto policy that

aimed at promoting integrated, phased, and self-sustained growth of the Indian automotive industry.

Allows automatic approval for foreign equity investment up to 100% in the automotive sector and does not lay down any minimum investment criteria

Govt. has granted concessions, such as reduced interest rates for export financing.

Formulation of an appropriate auto fuel policy to ensure availability of adequate amount of appropriate fuel to meet emission norms

Establish an international hub for manufacturing small, affordable passenger cars well as tractor and two wheelers

Ensure a balanced transition to open trade at minimal risk to the Indian economy and local industry

Assist development of vehicle propelled by alternate energy source.

Lying emphasis on R&D activities carried out by companies in India by giving a weighted tax deduction of up to 150% for in house research and R&D activities.

Plan to have a terminal life policy for CVs along with incentives for replacement for such vehicles

Economic

Economic pressures on the industry are causing automobile companies to reorganize the traditional sales process.

Weighted tax deduction of up to 150% for in-house research and R & D activities

More than 90% of the CV purchase is on credit.Finance availability to CV buyers has grown in scope during the last few years.

The increased enforcement of overloading restrictions has also contributed to an increase in the no. of CVs plying on Indian roads.

Several Indian firms have partnered with global players. While some have formed joint ventures with equity participation, other also has entered into technology tie-ups.

Exports have decreased in FY 2012-13 , But domestic sales have increased

The Indian economy has grown at 8.5% per annum.The manufacturing sector has grown at 8-10 % per annum in the last few years

Contributes about 4 per cent in India's Gross Domestic Product (GDP).

5 percent in India's industrial production.Generated about 4.5 lakh of direct employment

Social Since changed lifestyle of people, leads to increased

purchase of automobiles, so automobile sector have a large customer base to serve.

The average family size is 4, which makes it favorable to buy a four wheeler.

Growth in urbanization, 4th largest economy by ppp index.

Upward migration of household income levels.85% of cars are financed in India.

Car priced below USD 12000 accounts for nearly 80% of the market.

Vehicles priced between USD 7000-12000 form the largest segment in the passenger car market.

Indian customers are highly discerning, educated and well informed. They are price sensitive and put a lot of emphasis on value for money.

Preference for small and compact cars. Preference for fuel efficient cars with low running

costs

Technology

More and more emphasis is being laid on R & D activities carried out by companies in India

Technological solutions helps in integrating the supply chain, hence reduce losses and increase profitability.

The Government of India is promoting National Automotive Testing and R&D Infrastructure Project

(NATRIP) to support the growth of the auto industry in India

With the entry of global companies into the Indian market, advanced technologies, both in product and production process have developed

With the development or evolution of alternate fuels, hybrid cars have made entry into the market

Internet makes it easy to collect and analyze customer feedback

Few global companies have setup R &D centers in India.

Major global players like audi, BMW, Hyundai etc have setup their manufacturing units in India.

Environmental

Physical infrastructure such as roads and bridges affect the use of automobiles.

Physical conditions like environmental situation affect the use of automobiles.

Increasing number of vehicles on road is also increasing the pollution.

Option could be electric vehicles (?) Best option is Biofuel

LEGALThe automotive regulations in India are governed by

the Ministry of Shipping, Road Transport & Highways

The principal instrument governing the automotive sector in India is the Motor Vehicles Act, 1988 (MVA) along with the Central Motor Vehicles Rules 1989 (CMVR)

The Act governs emission norms and safety standards in India

For preparing safety standards, consideration is on various aspects. The Indian standards and norms are at par with international standards

CONCLUSIONThe growing mobility needs of the people in India

augur well for two and four wheeler industry.The cost advantage that India offers with respect to

product development is fast establishing the country as an R&D hub.

In addition, the credibility that India has gained as a cost effective manufacturing base for both small cars and two-wheelers is fuelling creation of capacities by all major manufacturers in the country.