INDIAN AUTOMOBILE INDUSTRY

Industry and Firm Analysis

Contents

Introduction Industry Attractiveness

PESTEL Analysis, Porter’s 5 Forces

Firm Analysis
Change over time About Maruti Suzuki, Business Model, SWOT, VRIO,
Investment Rationale, Key Risks, Way Forward
INTRODUCTION
CHANGE OVER TIME
First Phase: 1950-1980:
This phase saw slow and steady growth in
the automobile Industry. The Government
allowed only players with manufacturing
programs to operate in India.
Third phase: 1990-2000:
The severe balance of payment crisis led
to the economic liberalization of various
industries. In 1993, the automobile
industry saw de-licensing and FDI
investment up to 50% under the automatic
route, reduced import and excise duties.
Second phase: 1980-1990:
This phase saw more consolidation in the
automobile industry. The Indian Government
heavily regulated the industry with licensed
production. This lead to demand exceeding
production capacity with huge waiting time for
the consumers. This phase led to technology
adaptation by manufacturers and the
automobile industry's modernization,
Present Phase2000-Present:
The export gained importance from the
2000s. The 2002 Automobile policy
allowed 100% FDI under the automatic
route in the automobile industry.
PESTEL ANALYSIS

Political Legal
Economic Technological
Socio-Cultural Ecological
Government •Product quality and
intervention: •High interest rates •Smart phone
•Growth in •Emissions in the safety laws
• Carbon Emission •Unemployment introduction
urbanization form of Carbon •Contractual
norms •Inflation •BS VI technologies
•Increased per capita Dioxide are one of the liabilities limit in
•Accidents and •Depreciation of and other innovations
•Rise of ride-sharing serious environmental manufacturing
casualties Rupee against US
service pollutants created by chain..
Dollar
•Advent of Covid-19 motor vehicles daily •IPR - copyright,
trademark, or patent
laws
Industry Attractiveness: PORTER’S 5 FORCES

Threat of New Entry: Bargaining Power of Suppliers

•Number of suppliers relative to buyers: The

High barriers to entry is there for reducing ratio is skewed in favour of the OEM's.
threat of new entrants. Very few new players •Low Switching Costs:
can invest into this industry as it demands. A •Uniqueness of Supplier's product: OEM's have
high investment to set up is required for
the option to import products from countries
manufacturing facilities and distribution •Possibility of forward integration by
network.
suppliers:.
Bargaining power of buyers :

Buyers have low switching costs to shift to

other manufacturers. Indian buyers are
known to be price sensitive. They may
look for options that provide better price,
features or product quality, thereby
reducing margins.

Threat of substitutes:
Rivalry amongst the existing competitors
The primary substitute for passenger cars is
two-wheelers and public transportation From Post Liberalization in 1991, the degree of
systems, including bus, local and metro competition in the Indian passenger vehicle
trains. Increasing connectivity in the industry has rapidly intensified. Many foreign
domestic aviation sector can also serve as a players like Ford, Volkswagen have entered the
substitute for the passenger car. The low-priced hatchback segment which has further
substitutes depend on basic consumer intensified the rivalry.
needs.
Maruti Suzuki India Ltd
(MSIL)
Firm Analysis
About MSIL
Business Model Highlights

Largest dealership network & Lower Operational & Service

twin distribution model
High Resale Value
Costs

Launch of Vehicle Portfolio shift from Diesel to

Subscription program Petrol
Investment Rationale
01
Strong Financial Profile
• MSIL has negligible debt
levels, high liquidity and
net worth
• Strong cash flows to
support working capital
and capex
• Can Support its dealers,
provide discounts
• Reducing JPY exposure
• RoE, RoCE expected to
come back to normal
02 03 04
Suzuki-Toyota
05
Improving Market Share Strong Rural Presence Aggressive product
Collaboration pipeline
• Alliance to focus on
• Down trading: shift • Demand in rural area • Several product
new technologies,
towards entry level remains resilient due to launches are lined up
hybrid and electric
segment which is a good monsoon and to address the gaps in
vehicles – mitigate
dominated by MSIL higher crop yields – the market, especially
future risk due to
• Shift from shared MSIL can reap benefits after BS-VI
disruption
• Rural market is
mobility/public transport • Drive digital initiatives
to vehicle ownership – underpenetrated –
in its corporate
MSIL stands to gain most significant growth
strategy
• Focus on SUV segment opportunities
 SWOT ANALYSIS
STRENGTHS WEAKNESSES

 Japanese Manufacturing Technology

 Sales outlet & Service stations
 Operational efficiency-JIT
 Cost leadership Description
 Supplier development Suitable for all categories business and
 Diverse products in utility cars personal presentation, just put a description
 Strong second-hand market here.

 Rural market
 Electric and hybrid vehicle Description  Foreign OEMs entry
 Alternate fuel vehicle Suitable for all categories business and  Government
Description Policies
 Luxury car segment personal presentation, just put a description  Increasing
Suitable for all fuel prices
categories business and
 Increase in consumer purchasing power
here.  Substitutes
personal presentation, just put a description
 Export opportunities  Economic
here. cycle

OPPORTUNITIES THREATS

Valuable
•Manufacturing Technology
•Wide sales & service network
•Complementary services-
Finance, Insurance, leasing,
driving schools
VRIO ANALYSIS
Rare
• Strong supplier base-500
Tier1 vendors
• Customer service stations
• Vendor upgradation projects
for cost reductions
• R&D capability of SMC
Imitability Organized
•Japanese technology in •Financial support
production line- 1car/12 sec.
•management practices
•Good engine performance-low
•Patents
maintenance cost for users
 Way Forward

Technology Global Expansion

 Technology-EV wagon R and

investment of 3500cr in charging  Toyota JV Cross badging

infrastructure  New models-celero, alto

 BS6 diesel R&D Capacity  Mid range SUV Downstream Improvement
 New engine technology
 Gurgaon facility for power train,
 Expansion of R&D centre in
new plant at Bhiwadi, Rajasthan  improvements-20,000cr in Gujarat
Rohtak
 Tier 2- supplier ecosystem to develop supplier- tier1
development  MEP- manufacturing excellence
 Service on wheels program for further optimisation
 Skill on wheels- to train dealer and
vendor partners
THANK YOU
Have a nice drive