PESTEL Analysis of Automobile Industry: - Political Factors

PESTEL Analysis of Automobile Industry: -
Political Factors:-
 In 2002 the Indian government formulated an auto policy that aimed at

promoting in integrated, phased enduring and self-sustained growth of the
Indian automotive industry.
 Allows automatic approval for foreign equity investment up to 100% in the
automotive sector.
 Establish an international hub for manufacturing small, affordable passenger
cars and as well as tractors and two wheelers.
 Ensure balanced transactions to open trade at minimum risk to Indian economy
and local industry.
 Promoting multi-model transportation and the implementation of mass rapid
transport system.
 In 2002, the Indian government formulated an auto policy that aimed at promoting
integrated, phased, enduring and self-sustained growth of the Indian automotive
industry
 Allows automatic approval for foreign equity investment up to 100% in the

automotive sector and does not lay down any minimum investment criteria.
 Formulation of an appropriate auto fuel policy to ensure availability of adequate

amount of appropriate fuel to meet emission norms
 Confirms the government’s intention on harmonizing the regulatory standards with

the rest of the world
 Indian government auto policy aimed at promoting an integrated, phased and

conductive growth of the Indian automobile industry.
 Allowing automatic approval for foreign equity investment up to 100% with no

minimum investment criteria.
 Establish an international hub for manufacturing small, affordable passenger cars as
well as tractor and two wheelers.
 Ensure a balanced transition to open trade at minimal risk to the Indian economy and
local industry.
 Assist development of vehicle propelled by alternate energy source.
 Lying emphasis on R&D activities carried out by companies in India by giving a
weighted tax deduction of up to 150% for in house research and R&D activities.
 Plan to have a terminal life policy for CVs along with incentives for replacement for
such vehicles.
 Promoting multi-model transportation and the implementation of mass rapid transport
system.
Economic Factors
 The level of inflation Employment level per capita is right.

 Economic pressures on the industry are causing automobile companies to recognise
the traditional process.
 Government has granted concessions, such as reducing interest rates for export
financing.
 Indian economy has grown at 8.5% per annum.
 The manufacturing sector has grown at 8-10% per annum in the last few years.
 More than 90% of the Commercial vehicles purchased is on credit.
 Finance availability to CV buyers has grown in scope during last few years.
 Establishment of India as manufacturing hub, for many compact cars, OEMs and for
auto components.
 The level of inflation Employment level per capita is right.
 Economic pressures on the industry are causing automobile companies to reorganize

the traditional sales process.
 Weighted tax deduction of up to 150% for in-house research and R & D activities.
 Govt. has granted concessions, such as reduced interest rates for export financing.
 The Indian economy has grown at 8.5% per annum.

 The manufacturing sector has grown at 8-10 % per annum in the last few years.
 More than 90% of the CV purchase is on credit.
 Finance availability to CV buyers has grown in scope during the last few years.
 The increased enforcement of overloading restrictions has also contributed to an
increase in the no. of CVs plying on Indian roads.
 Several Indian firms have partnered with global players. While some have formed
joint ventures with equity participation, other also has entered into technology tie-ups.
 Establishment of India as a manufacturing hub, for mini, compact cars, OEMs and for
auto components.
Social Factors
 The average family size is 4 which makes it favourable to buy a 4 wheeler.
Car priced below USD 12000 accounts for nearly 80% of the market.
 Vehicles priced between USD 7000-12000 for the largest passenger segment in the
car market.
 Preference for small and compact cars. They are socially acceptable even amongst the
well off.
 Preference for fuel efficient cars with low running cost.
 Since changed lifestyle of people, leads to increased purchase of automobiles, so

automobile sector have a large customer base to serve.
 The average family size is 4, which makes it favorable to buy a four wheeler.
 Growth in urbanization, 4th largest economy by ppp index.

 Upward migration of household income levels.
 85% of cars are financed in India.
 Car priced below USD 12000 accounts for nearly 80% of the market.
 Vehicles priced between USD 7000-12000 form the largest segment in the passenger
car market.
 Indian customers are highly discerning, educated and well informed. They are price
sensitive and put a lot of emphasis on value for money.
 Preference for small and compact cars. They are socially acceptable even amongst the
well off.
 Preference for fuel efficient cars with low running costs.
Technological Factors
 The government of India is promoting National Automotive Testing and R&D
infrastructure project (NATRIP) to support the growth of auto industry in India.
 Technological solutions helps in integrating the supply chain, hence reduce losses and
increase profitability.
 Internet makes it easy to collect and analyse customer feedback.
 With the development of evolution of alternate fuels, hybrid Cars has made entry into
the market
 More and more emphasis is being laid on R & D activities carried out by companies
in India.
 Weighted tax deduction of up to 150% for in-house research and R & D activities.
 The Government of India is promoting National Automotive Testing and R&D

Infrastructure Project (NATRIP) to support the growth of the auto industry in India
 Customized solutions (designer cars, etc) can be provided with the proliferation of
technology
 Internet makes it easy to collect and analyse customer feedback
 With the entry of global companies into the Indian market, advanced technologies,
both in product and production process have developed.
 With the development or evolution of alternate fuels, hybrid cars have made entry into
the market.
 Few global companies have setup R &D centers in India.
 Major global players like audi, BMW, Hyundai etc have setup their manufacturing
units in India.
Environmental Factors
 Physical infrastructure such as roads and bridges effect the use of automobile if there
is good availability of roads or the roads are smooth then it will effect the use of
automobile.
 Physical conditions like environment situations effect the use of automobiles, if the
environmental is pleasant then it will lead to more use of vehicles
 Physical infrastructure such as roads and bridges affect the use of automobiles. If
there is good availability of roads or the roads are smooth then it will affect the use of
automobiles.
 Physical conditions like environmental situation affect the use of automobiles. If the
environment is pleasant then it will lead to more use of vehicles.
 With the entry of global companies into the Indian market, advanced technologies,
both in product and production process have developed.
 With the development or evolution of alternate fuels, hybrid cars have made entry into
the market.
 Few global companies have setup R &D centers in India.
 Major global players like audi, BMW, Hyundai etc have setup their manufacturing
units in India.
Legal Factors
 Legal provision relating to environmental population by automobiles.

 Legal provision relating to safety measures.
 Confirms the government intention on harmonizing the regulatory standards with the
rest of the world.
local industry.
 Indian government auto policy aimed at promoting and integrated, phase and
 Legal provision relating to environmental population by automobiles.
 Legal provisions relating to safety measures.
 Confirms the government’s intention on harmonizing the regulatory standards with

the rest of the world
 Indian government auto policy aimed at promoting an integrated, phased and

 Establish an international hub for manufacturing small, affordable passenger cars as
well as tractor and two wheelers.
local industry.
Political / Legal Economic Social Technological

- Environmental regulation - Economic growth - Income distribution - Government spending
and protection on research
- Taxation - Monetary policy - Demographics - Government and
industry focus on
technological effort
- International trade - Government - Labor / social mobility - New discoveries and
regulation spending development
- Consumer protection - Policy towards - Lifestyle changes - Speed of technology
unemployment transfer
- Employment law - Taxation - Attitudes to work and - Rates of technological
leisure obsolescence
- Government organization / - Exchange rates - Education - Energy use and costs

attitude
- Competition regulation - Inflation - Fashions and fads - Changes in material
sciences
- Stage of the - Health & welfare - Impact of changes in
business cycle Information technology
- Economic "mood" - - Living conditions - Internet!

consumer confidence
SWOT Analysis of Auto Industry in India:

STRENGTH
 Availability of low cost & skilled manpower .

 Total length of road network is 33 lakh KM (rank is 3rd in the world)
 Population is 115 Cr. (rank is 2nd in the world).
WEAKNESS
 Less investment in R&D .
 Political problems like Singur.
 Foreign competitor’s R&D is located at abroad.
OPPORTUNITIES
 Indian’s GDP @ PPP is going to be 3rd in the world by 2012.
 GST going to be apply from April, 2011.
THREATS
 Recession
 Now, India is an attractive destination for global auto giant like BMW, GM, ford etc.
Porter’s Five Force Model of Auto Industry in India:
Buyer Power
Size and the

concentration of
customers
Price Sensitivity Barriers to
Supplier power entry
Rivalry
Switching costs of Distribution
firms in the channels: for
Exit barriers
industry example, ease of
High Industry
Supplier access for
Growth
Concentration competitors.
Threat of
Cost efficiency
substitutes
There is no threat
of substitute of
Auto Industry

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PESTEL Analysis of Automobile Industry: -

 In 2002 the Indian government formulated an auto policy that aimed at

 Allows automatic approval for foreign equity investment up to 100% in the

 Formulation of an appropriate auto fuel policy to ensure availability of adequate

 Confirms the government’s intention on harmonizing the regulatory standards with

 Indian government auto policy aimed at promoting an integrated, phased and

 Allowing automatic approval for foreign equity investment up to 100% with no

 The level of inflation Employment level per capita is right.

 The level of inflation Employment level per capita is right.

 Economic pressures on the industry are causing automobile companies to reorganize

 The Indian economy has grown at 8.5% per annum.

 The average family size is 4 which makes it favourable to buy a 4 wheeler.

 Since changed lifestyle of people, leads to increased purchase of automobiles, so

 Growth in urbanization, 4th largest economy by ppp index.

 The Government of India is promoting National Automotive Testing and R&D

 Internet makes it easy to collect and analyse customer feedback

 Legal provision relating to environmental population by automobiles.

 Confirms the government’s intention on harmonizing the regulatory standards with

 Indian government auto policy aimed at promoting an integrated, phased and

Political / Legal Economic Social Technological

- Government organization / - Exchange rates - Education - Energy use and costs

- Economic "mood" - - Living conditions - Internet!

SWOT Analysis of Auto Industry in India:

 Availability of low cost & skilled manpower .

Size and the

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