Competitive Scenario in Automobile Industry

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Competitive Scenario in Automobile Industry


The industry witnessed radical changes and entered a competitive phase with de-licensing and liberalization in the 1990s. The two major developments during this period were a strong growth in volumes between 1993 and 1997 and the entry of international car giants into India, especially in the mid car segment.

The attraction for these companies was the largely untapped Indian market. However, these companies over-estimated the market in the short term and set up larger than required capacities.

This resulted in price wars and thereby affected the expected margins.
The global automotive industry is currently undergoing consolidation phase and the repercussions of this consolidation are likely to be experienced in India, too. The installed capacity for passenger car production in India is likely to reach around 1.8mn by end-2004, but the total passenger car sales is expected to be around 0.9mn.

This explains an over-capacity of around 50% as compared to the global over-capacity of around 30%. The consolidation of the automotive vehicle industry is likely to have serious implications on the automotive component industry too.


Most of the foreign companies entered India using the joint venture/collaboration route. While many of these conglomerates have turned out to be mutually beneficial few tie-ups weren’t as successful.

For example, Mahindra & Mahindra pulled out of car joint venture with Ford, General Motors bought over the stake of Hindustan Motors in its Indian car venture. Mercedes Benz has decided to operate independently after suffering severe losses with Indian partner Telco. Indian players are trying to maintain their hold on the Indian market, not giving in to multinationals.

But the very fact of Indian company’s reliance on foreign partners for technology is likely to drive the trend of collaborations followed by consolidations.

Foreign companies are now all over the Indian market. There is a need for a level playing field to bolster Indian auto industry.It is already a level playing field for companies setting up shop in India.

Even in the case of imports, entry barriers in commercial vehicle industry are among the lowest, with tariff at half that of cars. However, on the global plane, things are different.

Though the Indian industry, in the last few years especially, has gained considerably in internal efficiencies, in terms of external factors such as cost of finance, infrastructure and labour legislation, we have a long way to go for parity with the developed world


Competition is heating up in the sector with a host of new players coming in and others like Porshe, Bentley, Audi, BMW all set to venture in the Indian markets. We take a look at the key factors that are vital for gaining a stronghold in such a competitive scenario.
 
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