Threat of New entrants
The threat of new entrants is very high for the small car industry. The growing economy and the increasing buying power of the customers has made every automobile player to grab the opportunity in small car segment. The norms for Foreign Investment and import of technology have been progressively liberalized over the years for manufacture of vehicles including passenger cars in order to make this sector globally competitive The industry had an investment of about Rs. 50,000 crore in 2002-03 which has gone up to Rs. 80,000 crore by the year 2007. The automotive industry has already attained a turnover of Rs. 1,65,000 crore (34 billion USD). At present 100% Foreign Direct Investment (FDI) is permissible under automatic route in this sector including passenger car segment. The import of technology/technological up gradation on the royalty payment of 5% without any duration limit and lump sum payment of USD 2 million is allowed under automatic route in this sector With all the policies regarding the FDI and Tariff barriers as mentioned above, it has become easier for the foreign players to enter the Indian automobile industry. Result: Threat of new entrants is HIGH, hence Industry attractiveness is LOW
Threat of substitutes
A product’s price elasticity is affected by the presence of substitutes as its demand is affected by the change in the substitute’s prices. The new technologies available also affect the demand of the product. Substitutes for the Tata already existed in the market from players like Maruti, General Motors, Mitshibushi, Hyundai, Honda, etc. Most of the car manufacturer has a product in this segment to defend their market share in terms of volume.
Result: Threat of substitutes is HIGH, hence Industry attractiveness is LOW
Bargaining power of suppliers
Suppliers can influence the industry by deciding on the price at which the raw materials can be sold. This is done in order to capture profits from the market. The...
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