Business Environment

Assignment Submission

Master of Business Administration

Semester-II

Submitted By:
Prit Chaudhary
21044311011

Under the Guidance of:

Prof. Amit Shukla
Asst. Professor

Ganpat University- V. M. Patel Institute of Management

Submitted To: Prof. Amit Shukla

Asst. Professor
Introduction:

automotive industry, all those companies and activities involved in the manufacture of motor
vehicles, including most components, such as engines and bodies, but excluding tires, batteries,
and fuel.

In 2020, India was the fifth-largest auto market, with ~3.49 million units combined sold in the
passenger and commercial vehicles categories. It was the seventh-largest manufacturer of
commercial vehicles in 2019.

The two wheelers segment dominate the market in terms of volume owing to a growing middle
class and a young population. Moreover, the growing interest of the companies in exploring
the rural markets further aided the growth of the sector.

Investments:

• in November 2021, Indian Oil Corporation (IOC) and two other public sector oil firms
announced that they will install 22,000 electric vehicle (EV) charging stations over the
next 3–5 years.

• In November 2021, Hero Motor (HMC), the parent company of Hero Cycles, entered a
joint venture partnership with Yamaha, a Japanese two-wheeler major, to make electric
motors for e-bicycles for the global market.

• In September 2021, the Indian government issued notification regarding a PLI scheme
for automobile and auto components worth Rs. 25,938 crore (US$ 3.49 billion). This
scheme is expected to bring investments of over Rs. 42,500 (US$ 5.74 billion) by 2026.

• The Indian government has planned ~US$ 3.5 billion in incentives over a five-year
period until 2026 under a revamped scheme to encourage production and export of clean
technology vehicles.

• In November 2021, Hero Motor (HMC), the parent company of Hero Cycles, entered a
joint venture partnership with Yamaha, a Japanese two-wheeler major, to make electric
motors for e-bicycles for the global market.

• In April 2021, Mahindra & Mahindra announced a three-year investment plan in the
electric vehicles segment of Rs. 3,000 crore (US$ 403 million).

• In February 2021, the Delhi government started the process to set up 100 vehicle battery
charging points across the state to push adoption of electric vehicles.
Achievements:

• The industry attained a turnover of INR 165,000 crores and an investment of INR
56,850 crores.
• The industry has provided direct and indirect employment to 13.1 million people.
• Automobile industry is currently contributing about 5% of the total GDP of India.
• Under NAT Rip, following testing and research centres have been established in the
country since 2015.
o International Centre for Automotive Technology (ICAT), Manesar
o National Institute for Automotive Inspection, Maintenance & Training
(NIAIMT), Silchar
o National Automotive Testing Tracks (NATRAX), Indore
o Automotive Research Association of India (ARAI), Pune
o Global Automotive Research Centre (GARC), Chennai

Classification about automobile industry:

1. Based on Purpose

• Passenger vehicle

• Commercial Vehicle

2. Based on capacity

• Heavy motor vehicle

• Light motor vehicle

• Medium motor vehicle

3. Based on fuel used

• Petrol
• Diesel

• CNG

• Electric

• Solar

• Hybrid

4. Based on Transmission

1. Conventional

2. Semi- Conventional

3. Automatic

5. Based on No. of Wheels

• 2 wheeler

• 3 wheeler

• 4 wheeler

• 6 wheeler

• some vehicle has more than 6 wheels

6. Based on Side Drive

• Right side Drive

• Left Side Drive

List of Top 5 Automobile Companies in India:

1. Tata Motors Ltd

• Revenue: Rs 296,917 Cr
• Employees: 82,797
• Promoter holding: 38.37

2. Maruti Suzuki India Ltd

• Revenue: Rs 83,281 Cr
• Employees: 33,180
• Promoter holding: 56.21 %

3. Mahindra & Mahindra Ltd

• Revenue: Rs 77,077 Cr
• Market Cap: Rs 70,725 Cr.
• Employees: 42,875
 4. Hero MotoCorp Ltd

• Revenue: Rs 32,871 Cr
• Employees: 8,551
• Promoter holding: 34.63 %
• Market share: 36.0%

5. Bajaj Auto Ltd

• Revenue: Rs 30,598 Cr
• Employees: 8,064
• Promoter holding:53.52 %
• Market share: 18.7
SWOT Analysis of automobile industry:
Strengths:
• The domestic market is large
• The government provides monetary assistance for manufacturing units
• Reduced Labour cost
• Evolving industry
• Continuous product innovation and technological advancement
• Growth shifting to Asian markets
• Increase in demand for luxury commercial vehicles
• Manufacturing facilities in Asian nations to control cost

Weaknesses:
• Infrastructural setbacks
• Low productivity
• Too many taxes levied by the government increase the cost of production
• Low investments in Research and Development

Opportunities:
• Reduction in Excise duty
• Rural demand is rising
• Income level is at a constant increase
• Introducing fuel-efficient vehicles
• Changing lifestyle and customer demand causing a rise in the sale of two-wheelers
and compact cars

Threats:
• Increasing rates of interest
• Too much competition
• The rising cost of raw materials
• Steeply rising fuel prices
• Slow economy
• Economic recession
• High fixed costs and investments
Automobile Industry PESTEL:

The PESTEL analysis of the automobile industry shows how different external factors can
affect their business. As the lifestyle of people is changing, the automobile industry is also
emerging. PESTEL analysis of the automobile industry shows the problems that they can face
in the future. Thus, allowing companies to find out the ways to solve them.

❖ Political Factors:
The politics of a country has a direct effect on the business operating within its periphery.
The PESTEL analysis of the automobile industry shows how political issues can impact
the automobile industry:
• In most countries, governments have issued regulations regarding the production of
automobile parts to ensure the safety of passengers. If any company fails to fulfill these
requirements, their license may get canceled. Moreover, the company needs to spend
significant time on test running before launch, which can be costly at times.
• The administrations are also keen to restrict the ample usage of fossil fuels which create
more pollutants. The automobile manufacturer companies need to keep the emissions
under a specific range to continue with their business.
• The automobile industry of a country is also dependent on the government’s decisions
on export and import. If a company can import high-quality parts at a comparatively
lower rate, it can have a better profit margin.

❖ Economic Factors:

The lifestyle of people is dependent on the economy of a country. Therefore, it can also impact
the automobile industry. Here are some economic issues which can affect the automobile
business:

• The income of people from stable and emerging economic zones are increasing day by
day. Therefore their spending capacity is also on the rise. It is the reason the demand
for cars is going up.
• Many countries have imposed taxes on luxury items which have increased their price,
and hence a specific section of buyers may not choose to buy one. It may result in
decreasing demand for luxury cars in some countries. However, if many companies
launch comparatively cheap cars, they may get more buyers.
• If the price of automobile parts increases, then the cost of the cars will also increase. It
can be a reason for the decrease in demand for automobiles.
❖ Social Factors:
The socio-cultural conditions work on the businesses of a land. Social trends gravely impact
the production of cars. The PESTEL analysis of the automobile industry can find the
sociological conditions, which can toll upon the automobile industry.

• Cars are not only vehicles but are fashion statements. Hence, the companies need to
consider the choice of people while manufacturing new cars. Otherwise, it may go out
of fashion and may not get a good sale.
• Population distribution of a country also impacts the sales of cars. A state with a dense
population and large families tends to have a good sale of big cars like SUVs.
• The culture and tendency of communities also affect the automobile industry. For
example, the countries which have well-connected bus services may see less number of
people owning cars. There is also a tendency of developed countries to possess one or
more cars.

❖ Technological Factors:

• The automobile industry is hugely dependent on innovative technology to ensure the

safety of the people. Companies need to upgrade their technologies to make their cars
as safe as possible.
• The companies need to concentrate on the reduction of emissions. They can use modern
technologies to keep the emission rate in check.
• Self-driven cars are already out in the market. Hence in the future, they may get high
demands. The company needs to promote these self-driven cars and electric vehicles,
which may gain them more customers.

❖ Environmental Factors:

The automobile industry can get deeply impacted by ecological issues. As the concern over
pollution is increasing, the condition may toll upon their business. The PESTEL analysis of the
automobile industry can identify the environmental issues, which can impact the automobile
industry:

• As emission from the vehicle is a concern for the environmentalists and government.
The companies can use their latest technology to manufacture battery-driven or electric
cars, which can help in decreasing the rate of emissions.
• The governments of the countries are more willing to take up environmental policies to
decrease the pollution level, and the automobile manufacturer needs to abide by the
rules. It may lower the profit margin for automobile manufacturing companies.
• The research unit of the automobile companies needs to be strict with the testing.
They should debut a unit in the market if only it can pass the strict pollution tests.
❖ Legal Factors:

The laws and regulations of the countries can affect the business of the automobile industry.
Most of the countries have laws for automobile companies. Here are some legal issues which
can work on the business of the automobile industry:

• Many countries have strict laws to decrease the number of vehicles on the street, which
can help them to lower the air pollution level.
• During the forensic test of an accident, if it is proved that there was any problem with
the faulty parts or airbags, the company may have to face legal proceedings.
• If a vehicle company operates in an international market, the company must take care
of the tax laws and environmental laws. If they fail to do so, the company may get
banned in the country.
How to suceed in automobile industry:
What does it take to succeed in the Automotive Industry? Well, the majority of the
stakeholders in the industry agree that success comes with product quality. It is hard to argue
the impact that product quality plays in automotive success. Likewise, evidence from surveys
shows that when it comes to success and profitability in the world of automotive. Product
Quality ranks above other factors.

The Industry Demands Product Excellence Ask people in the Automotive industry what
leads to success and you’ll hear that product quality has a major impact. As you might expect,
survey respondents report product quality as a profitability and success driver more frequently
than any other factor.

But innovation reported as a profitability driver more frequently by Automotive companies

than any other industry in our survey isn’t far behind. Perhaps this isn’t surprising given the
major changes facing the industry.

The top success factors – quality, innovation, reliability, performance, and cost – are all related
to product excellence. But today’s dynamic market also demands agility. In fact, OEM’s were
almost twice as likely as suppliers to report time-to-market as a critical success driver.

Most Important Factors to Automotive Industry Success & Profitability:

What is Future of Automobile Industry in India?

This sector is very important economic sector from the perspective of revenue. In Indian
Automobile market two wheelers segments the leader of the owing to a growing middle class
and a young population with 80 per cent market share

What Expert says about the future of Automobile industry in India?

Indian auto industry is considered as one of the largest in the world. Indian auto industry
accounts about 7.1 per cent of the country's Gross Domestic Product (GDP). Automotive
industry includes wide range of companies and organizations involved in the design,
development, manufacturing, marketing, and selling of motor vehicles. Automobile industry
boosts the economic growth of the country. In India, Automobile industry includes two-
wheeler, three-wheeler and four-wheeler. Economy progress of this industry is indicated by the
amount of goods and services produced which give the capacity for transportation and boost
the sale of vehicles. In this sector with the huge increase in automobile production it is
indirectly increasing the demand for number of materials such as Steel, Rubber, Plastics, Glass,
Paint, and Electronics.

This sector is very important economic sector from the perspective of revenue. In Indian
Automobile market two wheelers segments the leader of the owing to a growing middle class
and a young population with 80 per cent market share. Now companies’ interest is growing in
exploring the rural market further added the growth of the sector. Overall Passenger Vehicle
(PV) segment has 14 per cent market share. In the near future India has strong export growth
expectations and a prominent auto exporter. Government of India has taken several initiatives.
In Indian market major automobile players are expected to make India a leader by the year
2020in Two-Wheeler and Four-Wheeler market in the world.

In India, automobile industry is supported by various factors such as availability of skilled

labour at low cost, robust R&D centres and low-cost steel production. This industry is also
providing great opportunities for investment and direct and indirect employment to skilled and
unskilled labour.

Market Size

In financial year 2017 production of passenger vehicles, commercial vehicles, three wheelers
and two wheelers grew at 5.41 per cent to 25,316,044 vehicles from 24,016,599 vehicles in
financial year 2016. During April-March 2017 sales of passenger vehicles grew by 9.23 per
cent, commercial vehicles by 4.16 per cent and two wheelers by6.89 per cent. In India by the
year 2020 Government of India’s vision to see six million electric and hybrid vehicle.
Foreign Investment

During the last few months several auto makers have started investing heavily in various
segments of the industry in order to keep up with the growing demand. According to data
released by Department of Industrial Policy and Promotion (DIPP)during the period April 2000
to June 2017industry has attracted Foreign Direct Investment (FDI) of worth US$ 17.40 billion.

Government Initiatives

In the automobile sector, Government of India is encouraging foreign investment and allows
100 per cent FDI under the automatic route.

Here are the following major initiatives taken by the Government of India:

• For road and water transportation, Government is planning to introduce biofuel

vehicles. India needs to look after alternative and cheaper fuels like methanol and cut
fossil fuel imports.
• By increasing custom duty on CBUs of commercial vehicles from 10 per cent to 40 per
cent Government of India extended support to the industry and reducing duty on chassis
from 24 per cent to 12.5 per cent for ambulance manufacturing.
• New Green Urban Transport Scheme plan introduced by the Government of India
aimed at boosting the growth of urban transport along with low carbon path for
substantial reduction in pollution with a central assistance and providing a framework
for funding urban mobility projects at National, State and City level by encouraging
innovative financing of projects.
• As highlighted in the Auto Mission Plan (AMP) 2016-26Government of India aims to
make automobiles manufacturing the main driver of ‘Make in India’ initiative, as it
expects passenger vehicles market to triple to 9.4 million units by 2026.
• In India, for Faster Adoption and Manufacturing of Electric and Hybrid Vehicles
government has formulated a scheme under the National Electric Mobility Mission
2020to encourage the progressive induction of reliable, affordable and efficient electric
and hybrid vehicles in the country.