Evolution Of The Global Automobile Industry Marketing Essay

Evolution Of The Global Automobile Industry Marketing EssayBy the start of twentieth century, the demand for motorcars started increment but the cars were restrained expensive, beca economic consumption these cars were establishd and assembled with hands. Henry Ford introduced the legendary Ford Model T which was the beginning of an era, where even middle score could own a car. For the source time, Fords Model T introduced the concept of Assembly line in the machinemobile vault of heaven. The concept of mass business-high volume piteous variety- was brought into concentre and this was make immortal by the words said by Henry Ford in his Autobiography where he says, Any customer can get to a car painted any color that he wants so long as it is black.The era after the First World War was cognise as the vintage era (1919-1930). The First World War was a milestone, as closed body cars was put into production in the 1920s and the engineering science of political machinemati c transmission was first conceptualised in this era. During the great depression in 1930s the egress of automobile manufacturers decreased drastically and consolidation in the pains took home base. The finis 1930-45 was a slack period, except for demand from military forces for personnel transport. After the World War II, super scale rehabilatation of war ravaged economies took place and this led to increased industrial activity and increased incomes. The development of automotive sector saw antithetic trends in different countries across the adult male. America was know for manufacturing power ridden luxurious cars Europe was cognize for manufacturing compact cars. This was also a period when growing level of world trade made contender from outside(prenominal) manufacturers a pertly reality with which the automobile firms had to deal with.The modern era of automobiles (1980-2010) is the era which saw the maximum action in the form of revolutionary radiation patterns, intensify performance and increased fuel efficiency. The oil shocks in 1973, 1980 and mid-nineties ensured that smaller and more fuel efficient cars came to stay even in the American market, which was known for its big cars and SUVs. With growing concern around the world about the consequences of globose warming, automobiles outpouring on alternative fuels became a reality. The worldwide commercial success of vehicles running on cleaner technologies equal Toyota Prius demonstrated the coming of age of clean fuel cars.VINAYThe Global Auto Industry TodayGlobal automobile hubs ar located in mingled come outs of Europe, America and Asia. Practically every major(ip) country has one or more auto hubs. The maximum number of automobile hubs is in Europe with United Kingdom having 258 hubs, followed by Romania with 197 and Fin kingdom with 83 hubs. United States of America has 47 auto hubs and Detroit in the most famous one. Among Asiatic countries both India and china dumbfound one hub each. Some of the major players in the market and the number of vehicles sold by them in the year 2009Companyno(prenominal) of vehicles soldToyota7,234,439G.M.6,459,053Volkswagen6,067,208Ford4,685,394Hyundai4,645,776Recession and Auto IndustryThe global automobile industry was hit hard by the economic crisis of 2008-09 and the effects be still being felt on the industry and the production. In December 2008 U.S. automobile sales dropped by 37% comp bed to earlier year. The impact was felt on non-homogeneous companies across the world but major among them were the top auto companies of the United States namely for Chrysler, General Motors and Ford which were so hit hard that they applied to be bailed out by the United States. The auto industry annually contributes 3.6% i.e. 500 billion dollars to U.S.As total GDP. This 30% decline in auto sales would blind drunk a direct 1% decrease in the output of the country. The automobile industry has a total employment of 8.5 lakhs work force into manufacturing, and 18 lakhs workers in auto dealerships in USA. In December 2008, the auto industry presented an appeal before the g everywherenment for 34 billion dollars bailout package to avoid getting bankrupt. In January 2009, the government gave out $24.9 billion from the $700 billion of total bailout fund for the Big 3 auto companies.Combating RecessionSome of the measures taken by various auto companies and the government which were necessary for the survival were that the government in china reduced its automotive taxes to spur flagging sales which actually happened. Seeing the falling production numbers, SBI reduced its interest rates on auto loans in February 2009.In the first few months of 2009, Tata Motors conducted a widespread marketing campaign announcing the debut of the Tata Nano. Nano was named the the great unwasheds car, and the Tata Motors hoped that the low constitute would be an advantage and motive behind customers to buy the vehicle in spite of the credit crisis. Unlike others, the atomic number 16 Korean automakers saw it as an opportwholey. The continue growth and success of korean companies is beca usance of the fuel-efficient, well-equipped and affordable cars having warranties and features. This attracted consumers from across the globe and that to at such a time when there was severe economic recession, oil prices were training at a tremendous rate and environment was an issue of concern for all and sundry. Thus South Korean auto manufacturers gave a strong competition to luxury vehicles and SUVs which were expensive and were from Japan, US and German auto manufacturers. In Europe sales had decreased drastically and views were expressed to leap out the automotive industry financially, in finicky in France, Ger more and Italy.Alternate auto fuelsToday seeing the changes happening in the world at large in terms of uprise oil and triggerman prices there is a growing trend among people to go for cars which atomi c number 18 small and compact and at the same time learn no compromise with the fuel efficiency and performance. Due to these rising concerns and aw arness among the people with regards to global warming and depletion of petro fuels, auto companies world over are trying to make use of alternate fuels like Natural gas, Bio diesel and Electric cars which are coming up to cater to the needs of the modern customer. These alternate fuels are environmentally warm and also very efficient and economical than the petroleum based fuels.ARJUNEvolution of Indian Automobile IndustryDuring the 1940s and 1950s, the industry was characterised by socialist ideology. The domestic auto industry was heavily protected and foreign firms were barred from entry. The Indian auto companies kick-started their businesses by importing know-how from foreign firms.Hindustan Motors and Tata design were in the business of manufacture and sale of power excavators, dumpers, bulldozers, and scrapers. The only pass enger cars manufactured were the Ambassador by Hindustan Motors and Premier Padmini by Premier Automobiles Ltd. Heavy Commercial Vehicles were manufactured by Tata Engineering and Ashok Leyland. The Leyland Comet bus was being employ by most of the state transport corporations.During the mid 1960s, the green revolution movement improved the agriculture in India. The worldwide Tractor Company of India, a joint venture between Mahindra Mahindra and the International Harvester Company, USA was established in 1963, during the green revolution. The economy was protected, and hence there was no innovation. The companies had limited licenses to produce goods. For instance, in the 1970s, to buy a Bajaj scooter a customer had to wait for 12 years.It was during the 1980s, the industry was warming up to delicensing in the auto sector. These policies were instrumental in establishing companies like Swaraj Mazda, a joint venture between Punjab Tractor Ltd., Mazda Motor Corporation, Japan Sum itomo Corporation, Japan. Delicensing removed the constraints on output, stimulants, technology, and location. This helped plants to leverage on economies of scale, optimal input combinations, and newer technologies. Domestic consumption increased, as a result of which the plants were provided with the necessary stimuli to innovate, increase productivity and improve feature. State intervention need not always submit to poor results. Maruti Udyog Limited (MUL) had extensive support of the bureaucrats. The Government of India helped MUL in matters like import clearances, land purchases and reduction of excise tariffs. Bureaucratic support notwithstanding, MUL had major advantages like economies of scale, first mover advantage, affordability, financing schemes and service ne twainrks.Since during the 1970s and 1980s, there was high degree of protection and regulation, the policies of the 1990s like liberalisation led to a yowl in the auto industry. Foreign multinationals produced t echnologically superior goods with guaranteed quality. The domestic market became increasingly competitive. Hyundai has emerged as the second most important car manufacturer after Maruti Udyog Ltd. (MUL) (SIAM, 2008). Other major players like Ford, General Motors, Toyota, etc affirm also entered the Indian Market.Source http//www.india-reports.com/articles/Auto-Industry-India-Demand-Growth.aspxThe graph shows a sharp increase in sales of automobiles since 1990s till 2000. The industry responded to the sharp increase in demand through over capacity, enhanced RD facilities, advanced technology and logistics.Auto Hubs in IndiaIndia is said to break three three primary(prenominal) hubs of automobile production.ChennaiIndia was recognized by various companies as a potential low cost base of manufacturing. One of the first companies set shop in India was Hyundai in 1996. It scouted for various land sites across India and zeroed in on Chennai. Today it produces 6,00,000 cars every year . There are many other companies in the automobile sector that are present in and around Chennai. Some prominent companies areAshok LeylandCaparo conferenceFordBMWDaimlerMitsubishiHindustan motorsNissanRenaultRoyal EnfieldThe factors that made it possible for Chennai to snuff it an automobile hub are stated below-Readily available base of operationsMost of the plants are located in the place called Sri Perumbudur. This place has excellent connectivity, with plenty of land availability. One of the most important reasons in favor of Chennai is the presence of a port. This serves the purpose of exporting cars and vehicles to foreign markets without bottlenecks affecting the process. During 2008-09 alone Chennai port shipped around 146000 cars and this manakin is estimated to grow at an exponential rate in subsequent years. As an alternative even Ennore port is being developed to cater to the growing demand. approachability of proper banking facilities also contributed to Chennai b eing seen as an auto hub.Availability of technical manpowerSouthern part of the country in general and Chennai in particular has an abundance of technical labor. On being asked whether he was happy and satisfied with Chennai, the Ford India managing director, Michael Boneham, said, Yes, we are satisfied. You have a very s display panel government and legislative environment. There is a transparent industrial policy no matter which political party is in power. You have governments very supportive of the industry. The second social occasion is the availability of labour. Educated reliable labour is the strength of Chennai. Overall, we are very happy with our experience in Tamil Nadu. The above words testify the brilliance of skilled labor in thrusting Chennai to limelight. In fact government is trying to reorient the educational institutions in and around Chennai to tailor make their courses to eccentric the needs of automobile industry.Investment friendly investment industrial po licyThe government of Tamil Nadu has been very forthcoming in providing all the institutional support necessary in the form of tax breaks and land at highly concessional rates. The most recent concession by the government has been to provide 300 commonwealth of land to construct an automobile testing track, for the common benefit of all automobile companies in the vicinity, which is known National Automotive Testing Research and phylogenesis Infrastructure Project (NATRIP) at Oragadam. . Power projects are being implemented on a fast track basis to cater to the growing efficiency needs from this sector.Abundance of suppliersChennai had some automobile industries even before the present automobile boom. This ensured that a wide range of ancillary units for manufacturing auto components flourished alongside the main industry. Right from tyre manufacturing companies like MRF and Srichakra tyres to the new engine production plant by Hyundai. Chennai accounts for 35% of Indias auto anc illary industry production. Such reliable supplies ensured that logistics for automobile companies becomes easy.PUNEPune was once known to be a pensioners paradise and a calm and quite city. Today it is one of the most important educational, auto and software hubs in the country. The city saw one of the first plants being set up by Premiere Motors the makers of the once famous Premiere Padmini set up a plant in 1960s.Today the city boasts of many automobile. Some of them being as follows-Tata MotorsBaja both bicyclersForce MotorsMahindra two wheelers (formerly kinetic)Mercedes BenzGeneral MotorsMahindraMahindraFIATVolkswagenThere are quite a few reasons for the emergence of Pune as an alternative hub for automobile industry. These are very much the same reasons as that for Chennai likea) Proximity to urban prosperous markets like Aurangabad, Nashik, Mumbai and availability ofport in Mumbai.b) Availability of manpower.c) Favorable investment climate.d) Reliable auto ancillary suppl iesPune has a wide range of Tier-1 Tier-2 and infrastructure suppliers. Prominent Industry Players includes Bharat Forge which is one of the top forging companies in the world. Their Pune facility includes their HQ, Design Center and Manufacturing Facility. some other is Sandvik, which is a world leader in cutting tools. Their Pune facility has been around for nearly 50 years.e) Research Institutes, Suppliers Infrastructure PlayersThere are certain research facilities that facilitate the automobile companies to conduct RD on a common platform and lower their costs.ARAI (Automotive Research Association of India) is a premier research and certification institution for the automotive industry in India.PARI Robotics mechanisation is one of the leading industrial automation companies and have setup factory automation systems at many global manufacturing facilities.Software and IT are increasingly acting an important rolecars and automotive manufacturing. Many leading global CAD/CAM/CA E Software Leaders are based in Pune. These includeSiemens (formerly UGS), PTC, Ansys. grievous IT Outsourcing Players in this space in Pune include Geometric and KPIT Cummins.GURGAONGurgaon as an automobile hub is almost entirely based on Maruti Suzuki and fighter Honda. scarcely it forms an important part of Indian auto hub because Maruti Suzuki has a market share of around 48% in the countrys passenger car market and annually it produces around 1 gazillion vehicles in its plants in Gurgaon and Manesar. The Gurgaon- Manesar stretch accounts for around 43% of the annual passenger vehicle production of 2.3 million in the country. Initially gurgaon was selected as a site in 1981 for setting up the Maruti-Suzuki plant due to its proximity to New Delhi-the political capital of India. Slowly ancillary industries serving Maruti developed over a given period of time. Due to unprecedented economic growth gurgaon developed into a satellite town of Delhi and infrastructure in the gurgaon -manesar stretch developed phenomenally. Maruti Suzuki expand its plant from time to time to meet the growing demand.The established ancillary industry and readymade infrastructure available acted as a draw for another major company, Hero Honda. In 1984 Hero group tied up with Honda motors of Japan to launch the Hero Honda group for manufacturing two wheelers in the country. Today Hero Honda group produces around 3.9 million bikes from its three plants and the two plants around Gurgaon alone are estimated to produce 3 million bikes an year. Hence Gurgaon today houses the largest two wheeler manufacturer and the largest passenger car manufacturer in the country.THE INDIAN AUTO INDUSTRY TODAYThis years Delhi Auto Expo 2010 exhibition showed strength of Indias automobile Industry, where the Indian company Tata motors presented products ranging from worlds jazzyest car Nano to the expensive luxurious Jaguar XJ model. Global luxurious car players like Toyota, Honda, and Volkswagen annou nced to launch small cars especially for Indian market. globally auto companies are facing a number of problems in the form of rising labour costs, saturation in developed markets etc. With so many problems facing the industry they started looking towards the developing nations as a possible base for manufacturing. India and china emerged as a natural choice for these companies with their huge and cheap workforce, investment friendly policies and huge domestic markets. India more so, due to the solid engineering and technical base that was institutionalized since the 1950s in line with Jawaharlal Nehrus policy of scientific temperament. Today India has emerged as a favoured destination for manufacturing small cars both the export market and for domestic market with 4.12 lakh small cars being exported from India in 2009-2010. thus far the heavy commercial vehicles sector in India has grown by leaps and bounds which till 2000 was almost a duopolistic market with only TATA and ASHOK LE YLAND being the two players. But with the economic activity in India in full swing foreign manufacturers like Kamaz, Volvo and Mercedes Benz have entered the country to set up a manufacturing base. 2 wheelers have been the mainstay middle class transport and is the largest automobile segment by volumes in the country. Indian two wheeler market is dominated by domestic players and foreign players except Honda have not been able to penetrate the market.Now there are various reasons why these Auto giants are concentrating on India in recent years.1) Huge untapped domestic marketLess than 1 percent of the population of India currently owns automobiles, which is a much smaller comparison as compared to the rest of the South-east Asia region. Also the large size of the middle class with increasing purchasing power and the youthful population as in India the highest proportion of population is below 35, there are huge opportunities to tap the rising demand in domestic market.2) quality m anpower at low costAnother advantage is availability of talent and skills at low cost. The concept of using India as an export hub is underpinned by its low labour and engineering costs. Indian engineers had considerable skills, and could make improvements quickly and cheaply.Bajaj Auto once dependant on Japanese giant Kawasaki but soon found that its own RD produced farthest better bikes for Indian conditions.Suzuki hired team of 25 engineers from India to Japan to develop new model Swift, which was big success in Indian markets.Tata Motors created the Nano, the worlds cheapest car, making the world sit up.Nissan-Renault in collaboration with Bajaj Auto are developing ultra cheap car.All above and many more examples proved the capability of and quality of skilled manpower in India.3)Relatively Secure Market For Global Auto MajorsHonda and Suzuki were the first foreign auto players to have venture with Indian companies Hero and Maruti in 2 wheeler and 4 wheeler segment respectively . The ventures were huge success and proved beneficial for both the companies. Hero Honda emerged as worlds largest manufacturer of two wheelers since 2001. Maruti-Suzuki is the only Indian company to achieve sales target of 1 million cars in single year 2009-10. During US recession time when the global auto sales was dwindling, the growing Indian domestic market sales helped both companies Honda and Suzuki to sustain and remain profitable. At that time, the world recognised the potential of Indian automobile market.4) Need for collaboration with local partnersThe Indian car market is highly price sensitive. This presents difficulties in pricing and positioning of product. The market leader, Maruti Suzuki has largely apply its pricing power to maintain its dominance in the A and B segments where it prices most of its products lower than its competitors. This forced global Auto majors to adopt different strategies for Indian market. Many of the global companies started collaborating with already established Indian auto companies to understand the need of local customer better. For e.g. Toyota-Kirloskar collaboration.5)Rising income levelsPrivate and public sector salaries have risen at healthy chip during the last few years. The sixth pay commissions and fiscal stimulus have boosted boilers suit wages. This helped to keep sales growing despite of recession and rising Inflation rate. Commercial vehicles showed highest growth of around 38% in current year 2009-10 over the previous year. While overall sales grown at around 26%.6)Export base to emerging marketsIndia is emerging as global manufacturing hub for small cars. Indias vast domestic market and the large pool of technically skilled manpower are the magnetism for the foreign Auto investors.The country is likely to export its small cars to emerging markets like Brazil, Argentina, Europe, Malaysia, and South Africa. These nations are in fact fast emerging as huge small car markets.Hyundai Motors, in 2008, ex ported 240,000 cars made in India and expecting 50 per cent of its 600,000 unit production in 2010 to be exported. The company currently exports to 95 global markets.Maruti is targeting at the SAARC region and West Asia as newer markets and is aiming at 30 per cent exports of their production.Another player, Nissan, which has a collaboration with Maruti for, exported 65,000 units of A-Star to Europe in 2008-09.India has overtaken China as a car exporter in year 2009, exporting 201,138 cars in January-July 2009 against Chinas 164,800. Indian exports in this period went up 18%, while Chinas fell by 60%. Of other big Asian exporters, Koreas exports have fallen 31% and Thailands 43%. In a terrible global recession, India is the only country with zooming exports.Domestic Market ShareAutomobile sector is one of fastest emerging sector in India. The Indian automobile industry today boasts of being the second largest two wheelers manufacturers in the world, second largest tractor manufactur er in the world, fifth largest commercial vehicle manufacturer in the world and fourth largest Car market in Asia.In India, volume wise the domestic automobile market is leading by 2 wheeler segment which comprises almost 76% of total sales.Figure As per Society of Indian Automobile ManufacturersImpact of Automobile Industry on Indian thriftinessThe industry currently contributes about 7 per cent in Indias Gross Domestic Product (GDP) and 5 per cent in Indias industrial production.It is targeted to grow quintuple by 2016 and account for over 10% of Indias GDP.After Government announced 100% FDI into automobile sector in 2002, lot of investments offered by foreign automaker companies. Even as the auto industry in developed countries cheekd serious financial problems bailed out by the government, the Indian automobile sector is consistently attracting perplexity global investors. Indian Auto sector of showed 70 per cent growth in foreign investment. The FDI inflows have increased f rom USD 675 million to 1,152 million in FY 09 over FY 08. Atleast five million jobs will be created by 2015.TAMSEPRESENT CHALLENGESInfrastructureAfter liberalisation, many foreign players entered into Indian market. At the same time, Indian assemblers have augmented their production capacity. But the main road block for them was poor road infrastructure. The cars are of superior quality and more fuel efficient. Indian consumers have the purchasing power but are not willing to buy the cars owing to narrow roads, lack of connectivity between cities, poor road conditions.Class continuance in KMNational Highways/Expressways66,754State Highways128,000Major district roads470,000Rural other roads2,650,000Total (approx)3,314,754India, with approximately 3 million kilometres of roadways, has the ternary largest road network. But this network is under huge pressure and needs modernisation. Lane capacity is abysmally low and only 16% of roads are four lanes and above. 40% of villages lack ac cess to all-weather roads. Additionally, Indian ports would need significant upgrades to handle high volumes of vehicles.Human ResourcesReducing number of mechanized engineers The new wave of IT, Electronics and communication has shifted the preference of students from core Mechanical engineering. Many of the Indian institutes have closed down ICE (Internal combustion Engineering) departments and reduced the intake of Mechanical Engineering seats.Shortage of semi skilled workers There is also an urgent need to improve the quality of skilled and semi skilled manpower work in the auto industry. To do this, the existing vocational educational institutions have to be upgraded and more number of such institutes should be started. Today, most of our vocational educational institutes have poorly trained, unmotivated and uninspiring teaching faculty, and outdated equipment, machines, syllabus and governance system.Shortage of human resources in auto design Creative people do not get the p roper training in automobile components design, which is the main reason why India has to import designs. We have very few design institutes and their creative output is minimal for the Indian Automobile Industry.Rising oil priceGdollar barrel.pngInternational price of crude oil is rising sharply. This can be a severe blow to the growing economy of India. Also the rise in oil prices will impact the automobile industry. But at the same time, it will lead to the development of alternative technologies. Indian companies should spend significant amount on RD of alternative fuels to remain in the competition.Weaknesses of the various players in the Indian automotive industryThey are classified in four different categories (1) Indian Assemblers, (2) Multinational Assemblers (3) Indian Component Makers, and (4) Multi-national Component Makers.Indian Assemblerslack of product design capability (except TELCO)Multinational AssemblersLack of experience with the Indian market, industry, and gov ernment.Small component supplier basehigh import tariffsIndian Component MakersSmall Size, FragmentationLack of know-how in certain areas.Multi-national Component MakersImport tariffs, currency exchange rate fluctuationsInexperience with Indian workforceJYO futurity of the Indian Automobile IndustryKey research highlights projected till 2015Market Research has shown that passenger car production in India is projected to tint 3 million units by 2015, with a CAGR of around 10%. The export of passenger cars is estimated to rise more than the domestic sales. Passenger cars and 2 wheeler segments are estimated to grow at between 10-12%. Rural Market of two-wheelers is expected to exceed 10 Million units. Auto component exports are likely to reach take over digit figures. Indian Auto sector is expected to become the worlds third largest automobile market by 2030, behind only China and the US.To compete at a global level, the factors that need to be improved areDesigning, engineering and technical skillsQuality systemsAdaptability to change in technologyRisks that auto manufacturers may face in futureA global slowdown can hamper the prospects of the industry. Due to the global meltdown as well as the slowdown of the Indian economy, the demand for automobiles has seen a slump. Although it is now picking up. This is because of the cyclical nature of automobiles, which rises and falls with the condition of the economy. Volatility in the prices of metal and other raw material such as plastics and vinyl is a cause for concern. Costs of Natural rubber may continue to rise by 25%, causing tyre manufacturers to procession their rates, which are affecting the industrys cost competitiveness. Competition from other developing economies may strain margins of Indian manufacturers. As the Rupee appreciates, exports could become costly.Future possibilities in the sectorExports Increasing the share of exports in the sources of revenue- Korea, South Africa, Thailand and Latin Amer ica i.e. basically expanding into varied regions will generate more revenue for the sectorLuxury cars They unremarkably cost above Rs. 20 Lakh and are also a big segment in India. The big three of Luxury cars in India are major players are BMW Mercedes and Audi. Rolls Royce and Volkswagen are expected to make their way into Indian markets. Relaxation of Import Tariffs will help reduce prices of luxury cars and in publish help its growth.Electric cars In the past decade, there has been increasing concern towards the environment. This includes the erosion of non renewable resources of energy such as petroleum. The pioneer of the galvanising car in India is the Reva (a JV of Maini Group India and AEV California) in 1994. Companies must strive to shift to environmentally friendly vehicles. For this advanced technical skill is required. By the end of 2010, the electric version of GMs Spark is expected to be launched.Smaller cars with improved fuel efficiency Rising prices of oil as w ell of environmental concerns will wedge manufacturers to better fuel efficiency of their vehicles. Small sized cars are more fuel efficient as well as better suited to Indian roads.Alternative fuels Vehicles need to be manufactured with the ability to run on fuels such as Ethanol, Propane or bio-diesel. Technical research must be made extensive on these. However, there are still some governmental restrictions on using ethanol as vehicle fuel. There is scope to use such fuels if and when government policies are relaxed.Hybrid technology A combination of IC engines as well as electric motors can be used to make hybrid vehicles. However, due to the high premium of 50-60% this may be preferred only by car owners and not commercial vehicle owners.The table below shows where manufacturers must place themselves in order to be players in the global markets. Indian Manufacturers must move towards becoming Contenders or Extenders.increase in sales in rural