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SWOT analysis of Automobile industry

By Hitesh Bhasin December 1, 2016

Automobiles like Cars, bikes and public transport systems are one of the most
important building blocks for Society. Cars can be status symbol, they can be
necessary transport, they can be for sport and whatnot. So what are the
strengths, weaknesses, opportunities and threats in the automobile industry?

Strengths in the SWOT analysis of Automobile industry

1. Evolving industry : Automobiles represent freedom and economic growth.

Automobiles allow people to live, work and travel in ways that were
unimaginable a century ago. Automobiles provides access to markets, to
doctors, to jobs. Nearly every automobile trip ends with either an economic
transaction or some other benefit to the quality of life.
2. Continuous product innovation & technological advancement : With the
advent of E-vehicles & alternative fuel such as Shell gas, CNG and
others,Automobile Companies are increasingR & D expenditure to drive the
next phase of growth through use of renewable sources of energy which
may be solar, wind etc.
3. Growth shifting to Asian markets : Although American & European market is
the pulse of this Industry, but the focus is shifting to developing markets like
China, India & other Asian nations because of the rise in disposable income,
changing lifestyle & stable economic conditions.
4. Increasing demand of VFM vehicles : Intense competition in the
matured/developed markets has forced automobile manufacturers to target
developing economies. But these developing economieshave high demand
for VFM products (value for money). In the automobile industry, VFM
products would be fuel efficient, high mileage vehicles because majority of
customers in these nations prefer vehicles for commuting. On the other
hand, developed nations need is of vehicles for interstate travelling, and high
speed vehicles suitable for long route with high engine power.
5. Increase in demand of luxury commercial vehicles : Companies like VOLVO,
Daimler/Chrysler, Bharat Benz are betting high & are targeting the
developing nations due to increase in demand of Luxury public
transportation system.
6. Manufacturing facilities in Asian nations to control cost : In order to control
cost & to manage shrinking margins automobile companies like Harley,
 Volvo, Bharat benz etc. are building their manufacturing facilities in
developing nations like India, China because these nations have cheap
workforce, are high in resources & are nearer to developed economies.
These are classic conditions of an emerging market.

Weaknessesin the SWOT analysis of Automobile industry

1. Cars recalled : Controversies relating to recalling vehicles on account of

some technical dis-functionality or non-abidance to govt. led rules is
becoming very common.
2. Bargaining power of consumers : Over the last 3-4 decades the automobile
market has shifted from demand to supply market. Availability of large
number of variants, Stiff competition between them, and long list of
alternatives to choose from has given power to customers to choose
whatever they like.
3. Growth rate of Automobile industry is the in the hands of the government
due to regulations like excise duty, no entry of outside vehicles in the state,
decreasing number of validity of registration period & volatility in the fuel
prices. These factorsalways affect the growth of the industry.
Opportunitiesin the SWOT analysis of Automobile industry

1. Introducing fuel-efficient vehicles : Optimization of fuel-driven combustion

engines and cost efficiency programs are good opportunities for the
automobile market. Emerging markets will be the main growth drivers for a
long time to come, and hence fuel efficient cars are the need of the hour.
2. Strategic Alliances :Making strategic alliancescan be a smart strategy for
Automobile companies. By using specialized capabilities & partnering with
other companies, they can differentiate their offerings.
3. Changing lifestyle & customer groups : Three powerful forces are rolling the
auto industry.Shift in consumer demand, expanded regulatory requirements
for safety and fuel economy, and the increased availability of data and
information. Also with the increase in nuclear families there has been
increase in demand of two-wheelers & compact cars and this will grow
further.
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4. Market expansion : Entering new markets like Asian & BRIC nations will
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result in upsurge in demand of vehicles. After these markets, other markets
are likely to emerge soon.
5. OEM priorities : Given the increase in electronic content, OEMs need to
collaborate with suppliers and experts outside the traditional auto industry.
Accomplishing this will require changes in the way OEMs function. OEMs
will be looking to their top suppliers to co-invest in new global platforms &
this will be the driving force in the future.

Threatsin the SWOT analysis of Automobile industry

1. Intense Competition : Presence of such a large number of players in the

Automobile industry results into extensive competition, every company
eating into others share leaving little scope for new players.
2. Volatility in the fuel Prices : At least for the passenger segment fluctuations
in the fuel prices remains the determining factor for its growth. Also
government regulations relating the use of alternative fuels like CNG. Shell
gas is also affecting the inventories.
3. Sluggish Economy : Macroeconomic uncertainty, Recession, un-employment
etc. are the economic factors which will daunt the automobile industry for a
long period of time.
4. High fixed cost and investment in R & D : Due to the fact that mature
markets are already overcrowded, industry is shifting towards emerging
markets by building facilities, R & D centers in these markets. But the
ROIout of these decisions is yet to be capitalized.

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About Hitesh Bhasin

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Comments

MONICA JOSHI says

The biggest threat appears to emergence of aggregators like Uber, Ola

Consumers who use car once or twice a week may prefer to use Uber, Ola
rather than investing in a car. The initial cost, the maintenance & Repairs
cost is much higher to the use & pay as per requirement services of
Uber, Ola Also considering the horrible traffic situations, one will always
prefer to have a Chauffeur driven Car provided by these service providers.

Reply

Hitesh Bhasin says

That will be in the urban cities only. In Rural, people will only have the
option of buying their own cars rather then using Ola or Uber. On the
other hand, in Urban areas, cars are more about prestige then actual
functionality. So people will buy cars, irrespective of the cab services in
their area.

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but when you compare over aBRANDS MARKETING FORUM
long period of PRODUCTS
time, your own car will
always
SERVICES be cheaper then
CONTACT cabs. At least for those who regularly go office.
ME >>

In the end, the automobile industry needs smaller cars like Nano and
others, which are marketed properly, instead of being marketed as a poor
peoples choice.

Reply

aaditya says

One fact is also that the cab providers will by more cars if customer
increase..so I dont think that its a threat for automobile industry
10 fastest car of the world check here..
http://znexxt.blogspot.com/2015/06/10-fastest-cars-in-world-and-
their.html?m=0
Reply

Minal Gherade says

Dear Sir @ Hitesh Bhasin,

Could you pls. share your analysis or predictions if any on subject :

Market potential for Aluminium Die Casting In India

Regards,
Minal

Reply
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Malay Baruah says

What are factor we should keep in mind while selling passenger to a

customer ?

Reply

Malay Baruah says

What are the factor we should keep in mind while selling passenger car
to a customer?

Reply
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