“Automotive: Gaining the Required Edge”

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“Automotive: Gaining the Required Edge”

By | March 2010
Page 1 of 7
1) What are the key challenges faced by automotive manufacturers in India?

The automotive sector today is probably one of the most intensely competitive sectors with almost all the major car manufacturers having set up manufacturing facilities in India. This has led to competition in every category and sub-category in this sector. Technology as a product differentiator is only limited, with most manufacturers introducing models in India in line with their international product portfolios. The rapid sophistication in this sector in a very limited period has led to a world-class ancillary and component industry, which has resulted in foreign car companies having a relatively large indigenous content. This has greatly enabled manufacturers to reduce cost and maintain process efficiencies. All the 5 competitive forces viz. 1) Rivalry of Competitors 2) Threat of New Entrants 3) Threat of Substitutes 4) Bargaining power of suppliers & 5) Bargaining power of Buyers , are very high in the Indian Auto Industry.

They need to consider each and every Competitive strategy like Cost Leadership, Differentiation, Innovation, Growth and Alliance and need to adopt multiple Competitive strategies to survive in the long run. No single strategy will be effective for long and they need to implement a mix of 2 or more strategies at a time.

However, with a large no. of manufacturers, overcapacity will continue to exist and manufactures will have to keep a keen focus on product and process efficiencies while at the same time stepping up brand positioning to have enduring consumer appeal. This sector may also witness consolidation in the future, and companies with strong export orientation will continue to witness growth and profitability in the medium to long term.

The case talks of 2 drivers that are a major challenge for the automotive sector and can be considered in our discussion viz. a) Customer b) Competition.

Customer: With so many choices and options, the...