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1. How is the global automobile industry evolving?

Ans: In the year 2012 Industrial profit was EUR 54 billion which is EUR 13 billion more than 2007.
However it is expected that by the year 2020 its profit will increase to EUR 79 Billion.
In 2007 BRICs and RoW accounted to 30 percent of global profit that is EUR 12 billion. In 2012, that share
increased to 60 Percentage that is EUR 31 Billion due to the increase in the sales by 65 percentage and
extended its growth in Europe, Japan, North America and South Korea. The major portion of the growth
came from china.
In 2012 automotive industry made a loss of 1 billion. The major reason for the loss was two as follows:

New customer: During the year there were very few new customer for the registration of new car. The
decline was more than 4 million unit as compares to 1990s.
Over capacity: There were large number of competitors in this market due to which there was a price
war of keeping it the least. Due to which profit also declined.

Due to the Tsunami- earthquake in 2011 in Japan and South Korea both suffered economic crisis. In the year
2012 both the countries saw their first profitability since 2008 as the export, production and the domestic sale
increased. It was good but it doesnt last for long as in 2013 sales in Japan again fall.
North America kept on improving had a profit growth of 14 billion more from 2008 to 2012. Sale in it raised to
maximum in this year. They have moved to increase deal in SUVs. There were many cost which were improved
to have more profitability. Automotive profits exceed precise level but the source have changed.
Along with the BRICs and RoW which gave a 60 percent of profit worldwide, they also gave a growth in
establishment of market around three times faster than it was. It is expected that in the year 2020, markets which
are emerging will contribute to two third of the automotive profit. China will be the main player in this
contribution.
As predicted 3.8 percent a year, including 4.4 percentage for the premium segment will result to the growth of
additional EUR 25 Billion of profit. According to the McKinseys research it can be said that china will
contribute to around EUR 13 billion and EUR 9 Billion from premium segment which will account to account to
more than half of the total profit. Other emerging markets will account to 4 Billion which will be from North
America.

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2. What are the future threats / challenges and opportunities?

Ans: The future threats/ challenges and opportunities are as follows:

Cost pressure and complexity: Increase in the regulation according to the environment lead increase
in the complexities which need to be managed apart from the domestic market. There was a huge
pressure on the producer to produce the quality product and to maintain the cost of the product to at a
level where they can earn profit and to sustain in the market. Due to the external force and high
competitor it created a huge pressure on the produce.

Competitor: New car market provides variety of product and large range of product difference on an
appeal deal for the customers. Due to which many customer whose purchase decision depends on the
cost of the product change their choice of product from one to other. Manufacture have tried hard in
building the brand. There were large number of buyer and seller due to which the market share was
distributed among all. Car lease companies are exception to these. This result to the bulk purchase
and a buyer purchase power was enhanced as favourable price can be obtained.

Shifting industry landscape: The shift on the industry landscape is the suppliers adding more value in
alternating technologies and innovative solutions for active safety and infotainment.

Digital Demand: As the consumers want more connectivity and are focused on active safety and ease
of use and the use of digital sources in making their purchase decisions.

Diverging markets: The market was diverted to different regions and segments pattern of demand and
supply. Diverging market on the basis supply portfolios and the emerging chienes after-sales market
offers new growth opportunities.

To capture future growth and profit from these challenges is great task to do but countries are trying to
come up with strategies to bulid up growth.

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3. How OEMs can benefits from these challenges and opportunities?
Ans:

The price cost gap narrows : Price and regulatory pressures mean that OEMs in the established
markets of Europe , North America, Japan, South Korea have little margin to differentiate when
coming to differentiate the right decisions.

Rising complexity encourage more platforming: In the entry and value segments, the pace of
introduction of new derivatives in the market will peak high.

Greening gets more expensive: investing more in e-mobility, meaning electrical powertrains.

The aftersales market in china becomes more important: China is already the worlds largest
automobile market with millions of vehicles sold in year 2012. Aftersales automotive parts revenue
on its own could grow from 20 billion by 2012 and will 100 billion by 2020.

Growth continues to shift: One major growth opportunity is in smaller vehicles and the majority sales
of this growth will be in urban areas and address large share of growth and competitions is in this
segment.

Connectivity becomes more important: Internet radio, smartphones, information centres, driverassistance apps, tourism information.

Retail of future comes closer: OEMs need to determine the best combination of online and offline
touch points to shape the customers decision making and experience along the purchase journey.

Suppliers add more value: Suppliers becomes more important because they add more value to its
mobility and constantly improving ICE and helping engine control systems, downsizing and
lightweight or automatic transmissions.

The OEM battle intensifies: A number of lower- cost brands have entered the market heightening
competition further. Chinas automotive sector is also suffering from significant overcapacities with
an average utilization rate of roughly 70 percent.

4. What are the implication for different industry segment?

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Ans: The different industry segments are:

Premium Segment: Premium players have responded to customer demands by creating more and
more derivatives and expanding their portfolios which is an approach to create customers

Value Segment: Value Segment is the key challenge and manage the global presence when there is
competitors.

Entry Segment: As market dynamics indicates that entry segment are emerging into the value
segments and more and more drivers show a growing affinity for the entry segments.

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