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SWOT Component Market

The

Analysis: Indian Auto


classical tool to assess the industry environment is through SWOT

analysis. The exhibit below identifies Strengths, Weaknesses, Opportunities and Threats (SWOT analysis in the !ndian "uto #omponent !ndustry$%

SWOT Analysis Auto Component Industry

Strength

& !s

globally cost competitive

& "dh eres to strict 'ualit y contro ls


( as a c c es s to la te st te c h n ol o g y

&

es supp ort to criti cal infra struc ture and meta l indu strie s

Opportunit ies & *ay serve as sourcing hub for

& )rovid

global automobile ma+ors

& Signific ant export opportuni ties may be realised through diversific ation of export basket & !mplem entation of ,alue% "dded% Tax (,"T in -./001 will negate the cascading impact of prices

23. -3"T453 S

exports and replacement market "ll prominent companies have technological tie%ups with global ma+ors *anufactures products that may be classified into six categories$ 3ngine )arts< 3lectrical )arts< =rive, Transmission > Steering )arts< Suspension > ?raking )arts< 3'uipment< and Others The fortunes of the industry are largely driven by the automotive industry )osted a decline in margins and returns in last five years till -./00/$ working capital cycle increased during the same period

&

& "nnual
producti on turnover of 5s. /60 billion (4S 71.8 billion $ small by global standard s "roun d 8,000 players in the unorganis ed sector and 100 in the organised sector.

&

&

&

& Share of
unorgan ised sector at / 9 : $ c a t e r s p r i m a r i l y t o r e p l a c e m e n t m a r k e t

&

& Share of
organise d sector at ;;:$ caters primarily to Original 3'uipment *anufactu rers,

Weakness & !ndustry has low level of research and development capability

& !ndustry is exposed to cyclical downturns in the automotive industry & *ost component companies are dependent on global ma+ors for technology

Threats & The presence of a large counterfe it compone nts market poses a significan t threat & )ressure on prices from O3*s continues

& !mport s pose price based competiti on in the replacem ent market & -urt her margin ali@atio n of smaller players likely

Structural Changes impacting auto component replacement demand


Ad ances on technology ! relia"ility of parts
#eading to demand reduction for spare parts

% Increase in OES $ "randed parts demand


Increasing focus of OEMs on aftermarket

Increasing imports on account of %TAs

Indian &eplacement

'arts Market
Impact of .alue Added Ta/ ).AT+
&egulatory changes inducing shift to(ards OES )Original E*uipment Suppliers+ , A&AI- E#. normsEmission ! safety norms , Effecti e reduction in ta/ "urden after process sta"ili0e

Growth of organized private service centers

Issues and Challenges Indian Auto Component Industry

Indian Auto Component Industry Issues and Challenges


5ising attrition rate Internal factors A "t Organi@ationsB level

Sustaining 'uality levels

Shipment delays causing cascading impact on aggregate planning of supplier organi@ations


4nder%investment in 35) (3nterprise 5esource )lanning infrastructure leading to inefficient stock planning and high inventory levels

capital investments E/ternal factors


A Other than organi@ationsB level

!ncreasing cost of raw material and labour wages !ncreasing competition and high lead time for international contracts (from O3*s *anaging *>" C D, C #ollaborations

)oor logistics > power infrastructure Tightening environmental > safety regulations leading to high

Indian Auto Component Industry amid changing glo"al scenario

Indian Auto Component Industry in ie( of changing 1lo"al situation


Trou"led times for top,2 3S auto ma4or .olatile input prices and reduced profit margins

&educed gro(th rate of domestic ehicle Sales

Top 9 4S auto ma+ors are either canceling or delaying orders from leading !ndian auto ma+ors, leading to bad shape of their financial books H* among the front runners in filing bankruptcy, -ord and #hrysler also in bad shape leading to less business from exports

E E E

Sudden dip in the vehicle demand in the last 'uarter has reduced the growth estimate for -. /00F A 0G

!ncrease in the volatility of ferrous and non%ferrous metals 4sage of newer input components due to technological up gradation 5educed profit margin due to cut%throat competition

Insufficient skill-sets and shortage of qualified labour

Increasingly stringent emission and safety regulations

E E E E
!ncrease in employee wages in the last decade has increased the operating costs With the entry of new players in last 8 A ; years, shortage of employees with specific skill sets

(igh environment concerns !ncrease in technological capability to reduce emissions due to increased 5>= (igher cost in ensuring better safety and adherence to safety protocol leading to higher input cost

Auto Component

E
Industry

&ising Customer E/pectations


Integration with Global (Developed) markets

E E E

!ntegration leading to lowering product life cycles 5educed time%to%market for new products Threat of new competition

E E

#ustomer expects more product features 3xpectation of high 'uality and reliable product offerings

Indian auto component industry in ie( of changing glo"al situation