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
- 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.
- Continuous product innovation & technological advancement : With the advent of E-vehicles & alternative fuel such as Shell gas, CNG and others, Automobile Companies are increasing R & D expenditure to drive the next phase of growth through use of renewable sources of energy which may be solar, wind etc.
- 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.
- Increasing demand of VFM vehicles : Intense competition in the matured/developed markets has forced automobile manufacturers to target developing economies. But these developing economies have 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.
- 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.
- 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.
Weaknesses in the SWOT analysis of Automobile industry
- 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.
- 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.
- 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 factors always affect the growth of the industry.
Opportunities in the SWOT analysis of Automobile industry
- 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.
- Strategic Alliances : Making strategic alliances can be a smart strategy for Automobile companies. By using specialized capabilities & partnering with other companies, they can differentiate their offerings.
- 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.
- Market expansion : Entering new markets like Asian & BRIC nations will result in upsurge in demand of vehicles. After these markets, other markets are likely to emerge soon.
- 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.
Threats in the SWOT analysis of Automobile industry
- 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.
- 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.
- Sluggish Economy : Macroeconomic uncertainty, Recession, un-employment etc. are the economic factors which will daunt the automobile industry for a long period of time.
- 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 ROI out of these decisions is yet to be capitalized.
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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.
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.
but when you compare over a long period of time, your own car will always be cheaper then cabs. At least for those who regularly go office.
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.
One fact is also that the cab providers will by more cars if customer increase..so I don’t think that it’s a threat for automobile industry
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
Malay Baruah says
What are factor we should keep in mind while selling passenger to a customer ?
Hitesh Bhasin says
You should check this article https://www.marketing91.com/high-involvement-purchase/