Automobile Sector

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The automotive industry designs, develops, manufactures, markets, and sells motor vehicles, and is one of the world's most important economic sectors by revenue. The term automotive industry usually does not include industries dedicated to automobiles after delivery to the customer, such as repair shops and motor fuel filling stations. The automobiles industry is made up from the passenger cars market, the light trucks market and the motorcycles market. The passenger car segment and the light trucks segment are valued at retail selling price (RSP). The motorcycles market consists of all classes of on- and off-road motorcycles including scooters and mopeds, valued at RSP.



The global automobiles industry grew by 4.9% and generated total revenue of $1,640 billion in 2010, representing a compound annual rate of change (CARC) of -0.8% between 2006 and 2010.

 

Industry consumption volumes increased with a CAGR of 1.8% between 2006 and 2010, to reach a total of 108 million units in 2010. The performance of the industry is forecast to accelerate, with an anticipated CAGR of 8.4% for the five year period 2010 - 2015, which is expected to drive the industry to a value of $2,449.2 billion by the end of 2015.



The global automobiles industry was hard hit by the global economic downturn and required significant government intervention in some countries. The industry did however return to growth in 2010 and is expected to see strong growth through to the end of the forecast period.



‘The Passenger Cars’ segment was the industry's most lucrative in 2010, with total revenue of $1,291.1 billion, equivalent to 78.7% of the industry's overall value. The

Light Trucks segment contributed revenue of $274.1 billion in 2010, equating to 16.7% of the industry's aggregate value.

Global Automobiles industry segmentation I: % share by volume, 2010
4%

17% Motorcycles

79%

Light Trucks Passanger Cars

 

Americas accounts for 35.6% of the global automobiles industry value. Asia-Pacific accounts for a further 30.8% of the global industry.

Global Automobiles Industry Segmentation II: % share by value, 2010
31% 35%

Americas RoW

30% 4%

Europe Asia-Pacific

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Toyota is the leading player in the global automobiles industry, generating a 6.8% share of the industry’s value. Volkswagen accounts for a further 6.7% of the industry.



Ford takes up 5.1% of market share. ‘Others’ constitute 81.4% of market share.

The automobiles market will be analysed taking manufacturers of passenger cars, light trucks and motorcycles as players. The key buyers will be taken as independent dealers and distributors, and manufacturers of raw materials, assembled and semiassembled components, and providers of energy, freight and transportation as the key suppliers.

Bargaining Power of Buyers:
 Buyers are capable of making large purchase orders, enter into long term contracts and ultimately put pressure upon market players to reduce prices.  Many of the top industry players hold well-established and popular brands, thus they are well sought after.  Brand strength in this industry does, however, serve to reduce buyer power as many buyers will enter into contracts with well-known manufacturers in order to meet consumer demand and boost their own sales margins.  In some cases retailers are franchised dealerships that have contracts with one industry player; thus they are dependent on that industry player, reducing buyer power considerably. Overall, buyer power in this industry is moderate.

Bargaining Power of Suppliers:
 There are several inputs to the global automobiles industry, including a variety of raw materials (such as steel, aluminium, resins, copper and lead), components, freight, transportation and energy.  Suppliers of raw materials are usually large companies who provide materials to a range of sectors, negating their reliance upon the automobiles industry for revenues, thus putting them in a strong position.  Furthermore, industry players require raw materials for their business, strengthening supplier power further. However, players are likely to use a variety

of suppliers for the majority of their inputs, meaning they are less reliant upon individual suppliers. Overall, supplier power is assessed as moderate.

Threat of New Entrants:
 Entrance to this industry requires large capital investment, thus entrance on a small scale is highly unlikely. Significant capital is needed to carry out large-scale production. Furthermore, this industry requires a high degree of intellectual property; many companies hold patents, trademarks and copyrights that are difficult to contend with.  One problem new entrants face is access to distribution channels, with dealers more likely to appeal to consumer demand and stock well-established brands. New entrants must be aware of stringent environmental (emission control, noise control, vehicle recycling, and fuel economy) and safety regulations being enforced by governments. Overall, there is a weak likelihood of new entrants to the industry.

Threat of Substitutes:
 The main substitute to the automobiles industry is used cars. The recent economic crisis brought about a surge of used car sales, with people simply being unable to afford new cars, however many governments implemented scrappage schemes, whereby consumers gain money towards a new car when scrapping an old one, thus making new cars more affordable.  New cars are also more reliable and economically friendly, with new regulations imposed on carbon emissions. A growing awareness in environmental issues could push more people into cycling or walking, however this is unlikely to happen on a mass scale, and therefore is unlikely to affect the industry as a whole. Instead, industry players are adapting and developing their products to become more environmentally friendly. Overall, there is a moderate threat of substitutes.

Rivalry:
 The global automobiles industry is dominated by several multinational companies (such as Ford, Toyota and Volkswagen), meaning that competition is fierce.

 The market was once dominated by US brands; however this is changing with companies from Japan becoming increasingly globalized.  Due to the recent economic downturn, and earthquake in Japan, there has been a slowdown in car manufacturing, exasperating rivalry.  Furthermore the cost of raw materials has also risen, increasing production costs as well.  Car manufacturers are under increasing pressure to meet global environmental demands, which further increases rivalry, as each company is trying to gain an edge on their rival competitors.  Forecasts also suggest an improvement in automobile sales which will help ease rivalry. Overall, rivalry within this industry is strong.

Volkswagen
       One of the leading global automobile manufacturers. Operates 60 production plants in 15 European countries and a further six countries in the Americas, Asia, and Africa. Volkswagen sells its vehicles in more than 153 countries. In FY2009, the group delivered 6.3 million vehicles to its customers worldwide. The group's brands include Volkswagen passenger cars, Audi, Skoda, SEAT, Bentley, Scania, and Volkswagen commercial vehicles. The group operates through three business segments: passenger cars and light commercial vehicles, Scania, and Volkswagen financial services. The passenger cars and light commercial vehicles segment is engaged in the development of vehicles and engines, as well as the production and sale of passenger cars, commercial vehicles, and the genuine parts business.   The group is made up of various brands, including: Volkswagen, Audi, SEAT, Skoda, Bentley, and Volkswagen Commercial Vehicles. The product range extends from low-consumption small cars to luxury class vehicles. In the commercial vehicle sector, the group offers pick-ups, buses, and heavy trucks.

Ford Motor Company:
 Ford Motor Company (Ford) is one of the largest automotive manufacturers in the world. The company manufactures and distributes automobiles across six continents. With 80 manufacturing facilities worldwide, the company's core and affiliated automotive brands include Ford, Lincoln, Mercury and Volvo.  The company conducts its business through two divisions: automotive and financial services. Within these divisions, Ford's automotive business is further classified  into reportable segments based upon its geographical and organizational structure. The automotive business division consists of the design, development, manufacture, sale and service of cars, trucks and service parts. Through this division, Ford produces a wide range of vehicles including cars for the small, medium, large and premium segments; trucks; buses/vans (including minivans); full-size pickups; sport utility vehicles (SUV) and vehicles for the medium/heavy segments.   In FY2009, the company sold approximately 4.8 million vehicles at wholesale throughout the world. The company's automotive business is organized into the following segments: Ford North America, Ford South America, Ford Europe, Ford Asia Pacific and Africa, and Volvo.     In addition to producing and selling cars and trucks, Ford also provides a range of after sales services and products through its dealer network. The company provides services such as maintenance and light repair, heavy repair, collision, vehicle accessories and extended service warranty. The financial services division operates through the company subsidiary, Ford Motor Credit (Ford Credit). Ford Credit offers a wide variety of automotive financing products to, and through automotive dealers throughout the world. The predominant share of Ford Credit's business consists of financing Ford vehicles and supporting the company's dealers. Ford Credit's primary financial products fall into three categories: retail financing, wholesale financing, and other financing.

Toyota Motor Corporation:
      Toyota Motor Corporation (Toyota) is the largest automobile manufacturer in the world. The company is engaged in the design, manufacture, assembly and sale of passenger cars, minivans and trucks and related parts and accessories. The company also provides financing to dealers and their customers for the purchase or lease of Toyota vehicles. Toyota and its affiliates produce automobiles and related parts and components through more than 50 manufacturing companies in 26 countries and regions. Toyota produces automotive in two categories: conventional engine vehicles and hybrid vehicles. The company's product line-up includes sub-compact and compact cars, minivehicles, mid-size, luxury, sports and specialty cars, recreational and sport-utility vehicles, pickup trucks, minivans, trucks and buses.    The company sells its products under Toyota, Lexus, Hino and Daihatsu brands. Lexus is the luxury car division of Toyota, and is operated as an entity separate from the Toyota brand. Hino produces and sells commercial vehicles. In FY2009, the company recorded total sales of 7.5 million units, as compared to the unit sales of 8.9 million in FY2008. Out of the total sales, the company sold 2.2 million vehicles in North America; 1.9 million in Japan; 1.06 million in Europe; 904,000 in Asia; and a remaining 1.4 million in other countries.  Toyota's financial services business segment provides finance to dealers and their customers for the purchase or lease of Toyota vehicles. The segment also provides retail financing, retail leasing, wholesale financing, credit cards, housing loans and insurance services. The company's network of financial services covers 32 countries and regions.  The company's other business segment includes various non-automotive business activities, such as intelligent transport systems, information technology and telecommunications, e-TOYOTA, housing, marine, and biotechnology and forestation businesses.

   

In 2015, the global automobiles industry is forecast to have a value of $2,449.2 million, an increase of 49.3% since 2010. The compound annual growth rate of the industry in the period 2010–15 is predicted to be 8.4%. In 2015, the global automobiles industry is forecast to have a volume of 146.9 million units, an increase of 36% since 2010. The compound annual growth rate of the industry in the period 2010–15 is predicted to be 6.3%.

Strengths
  The world’s major car manufacturers continue to invest in India and now the supplier segment is attracting private equity investment. Foreign joint ventures (JVs) ensure capacity building for local partners, as overseas firms bring expertise.

Weaknesses
  Local demand is still skewed heavily towards low-cost vehicles, due to low income levels. The cost of production is generally higher than some other Asian states, such as China, although these costs can vary from state-to-state, according to the level of infrastructural development and electricity costs.

Opportunities
 The premium segment is benefiting from higher levels of personal wealth, attracting investment from brands such as Audi, while Tata has expanded the Jaguar Land Rover division into India.  The commercial vehicle segment stands to benefit from a number of new JVs announced recently, including Ashok Leyland and Nissan, and Isuzu and Swaraj Mazda, while the bus segment is also attracting investment.

Threats
  High tariffs on imports stand to restrict the potential growth of the hybrid vehicle segment, as the cost of the technology is already expensive before taxes. Fees for local testing of new models, such as those being encountered by BMW as it attempts to launch the Mini brand, could deter some manufacturers.

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The proportion of vehicles to the size of the population is very low, with less than 10% owning a passenger car. On the basis of present income trends, and an increased willingness to borrow money, the number of households able to buy cars could double by the end of the decade.

  

With such a high proportion of purchases financed by credit, however, much will depend on the country’s response to the global credit crisis. As a result of increased demand, competition is rising, with global giants seeking to gain a foothold in the region through joint ventures (JVs) with local firms. India’s auto sector achieved record growth of 31% year-on-year (y-o-y) in calendar year 2010, with car sales reaching 1.87mn units, compared with 1.43mn units in 2009 when sales fell dramatically during the financial crisis.

Manufacturer Maruti Suzuki (formerly Maruti Udyog) Hyundai Motor India Tata Motors Honda Siel Cars India

FY 10 1,018,365 314,930 234,930 61,185

FY 09 792,167 244,000 200,159 52,420

% chg y-o- Market Share y 28.5 29.1 17.4 16.7 52.2 16.2 12.0 3.1

25 Nov. 11: Extra strong yen threatens to break up auto industry: Toyota chief
"The entire auto industry has begun to collapse" due to historically high-levels of the Japanese yen against the U.S. dollar, said Toyota Motor Corp. President Akio Toyoda in an interview. He emphasized the importance of strengthening the industry's domestic foundation even while the yen is in the upper 70s to the dollar. "Our focus is on Japan. We need it as a venue to foster ultra-modern technology to compete in the global marketplace," he said.

Toyoda vowed the company will do all it can to cut costs and take other austere measures to stick to its stated policy of producing at least 3 million units domestically. But he expressed concern about an ongoing hollowing out of Japan's auto industry, saying even Toyota Motor may have to shift production abroad if the yen continues to strengthen against the dollar and there are no incentives in Japan to promote the growth of cutting-edge technology.

24 Nov. 11: Market getting difficult, may miss this year's sales target: BMW
BMW India today said it may miss the target of selling 10,000 vehicles in the domestic market as the luxury segment has also been affected by the slowdown witnessed in the automobile industry. BMW India President Andreas Schaaf said the month of October, which is usually one of the best months along with March in terms of sales, has not been as good as expected. Earlier this year, the company had increased production capacity of its Chennai plant to 11,000 from 10,000 units previously. Car sales in India have been declining this year and registered the steepest monthly decline in nearly 11 years in October, tanking by 23.77 per cent on account of a huge drop in output by the country's largest car-maker Maruti Suzuki due to labour trouble, coupled with high interest rates and rising fuel prices.

10 Nov. 11: Auto industry seeks lower tax on big cars
With sales of cars contracting 24% in October, the automobile industry has approached the Union government with proposals for the next budget that include cutting tax on big cars. Automobile companies want the government to reduce excise duty on large cars to 16% from 22%, said three people familiar with the development.

Honda Siel Cars India June sales up
Honda Siel Cars India Ltd., a joint venture between the Honda Motor Company of Japan and Siel Limited, a Siddharth Shriram Group company, has reported total sales of 3,455 units in June 2011, an increase of 48%, compared to 2,334 units in June 2010.

Lear names new president and CEO
Lear Corporation, a supplier of automotive seating and electrical power management systems, has appointed Matt Simoncini as its new president and CEO, effective September 1, 2011.

A123 Systems wins new battery production contract from GM
General Motors has awarded a production contract to A123 Systems, a developer and manufacturer of advanced Nanophosphate lithium ion batteries and systems, for batteries to be used in future GM electric vehicles to be sold in select global markets.

GM to invest $117 million in Oshawa assembly plant
General Motors, or GM, has announced that it will invest $117 million to prepare the Oshawa assembly plant in Ontario, Canada to build the all new Cadillac XTS, creating or retaining 400 jobs on the Flex Line.

Toyota announces prices for all-new 2012 Yaris, Sequoia, Tundra & Sienna
Toyota Motor Sales, USA., Inc. has announced manufacturer's suggested retail prices, or MSRP, for the all-new 2012 nextgeneration Yaris subcompact, Tundra fullsize pickup truck, Sequoia large sport utility vehicle and Sienna van.

Toyota launches all new Innova Crysta in India
Toyota Kirloskar Motor Private Limited, a joint venture between Toyota Motor Corporation and the Kirloskar Group, has introduced the Innova Crysta Limited Edition in India.

Tata Motors’ lower global sales in July
The Tata Motors Group has reported that its global wholesales, including Jaguar Land Rover, for July 2011 decreased 6% to 85,392 vehicles, compared to July 2010.

Ecotricity to provide green energy to Ford's Dagenham Diesel Centre
Ecotricity, a UK-based renewable energy company, has announced that the company is to erect a third windmill to power Ford's expanded Dagenham Diesel Centre with 100% green energy.

Ford of Europe July sales down
Ford of Europe has reported that sales in its traditional 19 markets were 93,700 units in July 2011, a decrease of 4.4%, compared to the same period of 2010.

GM to invest $150 million in Bekasi manufacturing facility
General Motors, or GM, has announced that it will invest $150 million in the reactivation of its Bekasi manufacturing facility in West Java, Indonesia. The plant will begin

Maruti unveils all new Swift
India-based car manufacturer Maruti Suzuki India Limited has unveiled its all

new Swift. Built on an all new platform, the new Swift is longer and wider than its predecessor, the company said.

production of a new line of people movers for Southeast Asia in 2013.

Honda launches new Jazz in India
Honda Siel Cars India Ltd., a joint venture between the Honda Motor Company of Japan and Siel Limited has launched the new Honda Jazz.

Volkswagen Passenger Cars July deliveries increase 17%
Volkswagen AG has announced that total deliveries of the Volkswagen Passenger Cars brand increased 17.2% to 419,000 units for the month of July 2011, compared to 357,600 units for the same month of 2010.

Kia Motors pricing for 2012 Soul
Kia Motors America, Inc., the marketing and distribution arm of Kia Motors Corporation, has announced that pricing for 2012 Soul will begin at a $13,900 manufacturer's suggested retail price, or MSRP, while the Soul A/T starts at $15,700.

Lexus unveils all-new 2013 GS 350
Lexus has unveiled the all-new GS 350 in US. In addition to it, other 2013 GS models including hybrid and F Sport versions will be launched in early 2012.

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