Barriers for entry in automobile industry india

The Auto Industry is significant. It employs 9 million people directly and 50 million indirectly and politically it must rank among the top three industries worthy of government subsidy or interference. Without their exit, entrants are never allowed to bring disruptive ideas to bear and innovation simply stops.

Barriers for entry in automobile industry india

Demand is linked to economic growth and rise in income levels.

Barriers for entry in automobile industry india

Per capita penetration at around eighteen cars per thousand people is among the lowest in the world including other developing economies like Pakistan in segments like cars.

While the industry is highly capital intensive in nature in case of four-wheelers, capital intensity is a lot less for two-wheelers. Though three-wheelers and tractors have low barriers to entry in terms of technology, four wheelers are technology intensive. Costs involved in branding, distribution network and spare parts availability increase entry barriers.


With the Indian market moving towards complying with global standards, capital expenditure will rise to take into account future safety regulations.

As compared to their global counterparts, both the two-wheeler as well as four wheeler segments are relatively lesser fragmented. However, things have changed, especially on the passenger cars front as many foreign majors have entered the Indian market.

As a result, pricing power is likely to diminish going forward. Automobile majors increase profitability by selling more units. As number of units sold increases, average cost of selling an incremental unit comes down. This is because the industry has a high fixed cost component.

This is the key reason why operating efficiency through increased localization of components and maximizing output per employee is of significance. Demand Largely cyclical in nature and dependent upon economic growth and per capita income. Seasonality is also a vital factor.

Barriers to entry High capital costs, technology, distribution network, and availability of auto components. Bargaining power of suppliers Low, due to stiff competition. Bargaining power of customers Very high, due to availability of options. While the year started at a good note but the industry headwinds like Demonetization, GST, BS norms led to a slowdown.

The hit on profitability was higher than the hit on the volumes because most of the two-wheeler players offloaded their inventory on hefty discounts post the implementation of BS Norms. The worst hit segment due to economic headwinds was the three-wheeler industry.

One of the only segment that proved to be resilient amid the ongoing uncertainties in the automobile segment in FY17 was Passenger Vehicles PV.

The Indian four-wheeler segment is going through a shift from passenger vehicles to utility vehicles. The industry has seen a flurry of new launches by all the participants in this space. The spending on constructing roads, airports and expected high GDP growth will benefit auto sector in general.

Historically, the Indian Passenger car market has been skewed towards small passenger cars. However, there is a structural change taking place in the industry with demand for UVs taking over the passenger car.

This shift is paving a way towards new avenues of the growth and will result in a more profitable growth for the sector. In the 2-wheeler segment, motorcycles are expected to witness a flurry of new model launches.

TVS, Honda and Hero Motocorp will continue to benefit from higher demand for ungeared scooters in the urban and rural markets. In the last four years, scooters have grown at a faster clip than motorcycles and this trend is expected to continue going forward.

The 3 wheeler industry, where Bajaj Auto is the market leader, is also poised for growth on the back of new permits and increase in exports. While good monsoon is a positive for the tractor sector, assuming that non-farm incomes climb up, volumes should hold up well in the longer run despite a year or two of poor monsoons.

The privatization of select state transport undertakings bodes well for the bus segment. Auto industry has witnessed multiple tailwinds in last two to three years like multi-year low interest rates, subdued metal prices major raw materiallow oil prices translating to lower petrol priceshowever, we see many of these factors showing early signs of reversal.

This can result pressure on both the volumes and profitability. The government of India has shown an increased interest towards electric vehicles and has set for an ambitious target of all electric cars by There is an increasing buzz for e-mobility and all the companies in the sector are preparing themselves for the future.The Entrant’s Guide to The Automobile Industry.

Feb 23, ’15 PM.

How to Research the Automobile Sector (Key Points)

Author Horace Dediu Categories Asymcar, Industry. Like a siren, it calls. Given the economies of scale in manufacturing, a consolidation occurred and barriers to entry exploded when volumes became significant.

Barriers For Entry In Automobile Industry India. Automobile Industry, India Automobile Industry Following India's growing openness, the arrival of new and existing models, easy availability of finance at relatively low rate of interest and price discounts offered by the dealers and manufacturers all have stirred the demand for vehicles and a strong growth of the Indian automobile industry.

India - 4-Industry Policies India - Trade BarriersIndia - Trade Barriers Includes the barriers (tariff and non-tariff) that U.S.

companies face when exporting to this country.

Barriers for entry in automobile industry india

For purposes of entry requirements, India has distinguished between goods that are new, and those that are secondhand, remanufactured, refurbished, or. Jun 21,  · In a speech to the Automotive News Congress in Munich, Germany, BMW sales and marketing chief Ian Robertson said the automotive industry will see more change in .

India - Market Challenges Learn about barriers to market entry and local requirements, i.e., things to be aware of when entering the market for this country.

Pick a Board. Barriers to Entry in Automotive Production and Opportunities with Emerging Additive Manufacturing Techniques Conventional car manufacturing is extremely capital and energy-intensive.

Due to these limitations, major auto manufacturers produce very similar, if not virtually identical, vehicles at very large volumes.

The Entrant’s Guide to The Automobile Industry | Asymco