Threat of New Entrant is low:

1.      Large amount of capital required

2.     Incumbent companies have high competitive rivalry which could pose barriers to new
entrants would bring innovative products and ideas to the industry

3.     Few legal barriers protect existing companies from new entrants

4.     All automotive companies have established brand image and reputation, based on
consumer trends and taste because porter does not provide framework for predicting
consumer behaviour creating a good product.

5.     Products can be differentiated by design and engineering quality

6.     New entrant could easily access suppliers and distributors

7.      It is very hard to achieve economies of scale for small companies

Bargaining power of supplier is weak:

1.      There Large number of suppliers

2.     Car and bike manufacturers are large in size but there are a few small companies too

3.     Companies use another type of material (use one metal instead of another) but only to
some extent (plastic instead of metal)

4.     Materials widely accessible and don’t pose a competitive advantage to one specific
company

Bargaining power of Buyers is very Strong

1.      There are many buyers

2.     Most of the buyers are individuals’ customers that buy one car or one bike,

Commercial application is but corporations or governments usually buy large fleets and can
bargain for lower prices

3.     It doesn’t cost much for buyers to switch to another brand of vehicle or to start using
other type of transportation

4.     Buyers can easily choose alternative car brand

5.     Buyers are price sensitive and their decision is often based on how much does a vehicle
cost

6.     Buyers do not threaten backward integration

Threat of Substitutes is moderate in this sector due to

1.       Alternative types of transportation, such as bicycles, motorcycles, trains, buses or

planes

2.     Substitutes can rarely offer the same convenience with products being differentiated
such as EV, hybrid

3.     Alternative types of transportation almost always cost less and sometimes are more
environment friendly

Industry Rivalry is very Strong

1.      Moderate number of competitors

2.     Exit the industry is equally tough as entry as it is a capital-intensive industry and a firm
would decide to leave an industry it would incur huge losses, so most of the time it either
bankrupts or stays in automotive industry for the lifetime

3.     Demand is saturated but companies can maximise their profits with a positive sum game
by creating their customer segments

4.    Different size of firms

5.     Customers have brand loyalty

6.     Moderate threat of M&A

Overall, the automobile industry analysis based on porter’s five forces makes it a highly
competitive industry with high barriers to entry and exist. Companies exist mostly in a
monopolistic competition with high bargaining powers of buyers. Hence the profitability of
the industry is hugely dependent on customer centric approach rather than strictly pure
competition among companies