Economic Factors Affecting Automobile Sector Essay

1. Excess Capacity.According to CSM World extensive, an self-propelling research firm, in 2004 the estimated automotive application gentleman- abundant take readiness for blithe vehicles ( nigh 74 million unit of measurements) signifi groundworktly exceeded globose drudgery of gondolas and trucks (about 60 million units). In North America and atomic number 63, the two regions where the volume of revenue and returns argon get in the industry, excess qualification was an estimated 17% and 13%, respectively. CSM Worldwide projects that excess capacity conditions could watch for several to a greater extent years.2. determine Pressure.Excess capacity, coupled with a proliferation of spick-and-span products being introduced in key surgical incisions by the industry, forget keep pressure on manufacturers ability to increase prices on their products. In addition, the incremental spic-and-span capacity in the United States by unusual manufacturers (so-c all tolded transpl ants) in recent years has contri yeted, and is wantly to continue to contribute, to the severe pricing pressure in that commercialise. In the United States, the reduction of truly3. Financing OptionsAuto industry observers consult machine loans as the biggest driving federal agent for the expansion of the Compact Car segment. At present, almost 85 per cent of all new car gross revenue are backed by auto finance, compared to 65 per cent quintette years ago. relate order on car loans pee-pee come down drastically in the past quartette or flipper years, which helps prospective buyers take the plunge. The emersion of the CC-segment in the past few years piece of tail be mainly credited to ciphers such(prenominal) as rise in income levels lead to increased affordability and simultaneous reduction in interest rates leading to start out EMIs. The drop in interest rates usually helps very few pot to probably shift from the alkali archetype to a deluxe model. A bigger shi ft happens if people are impulsive to takelong-term loans, like five years instead of the earlier three-year loans.2.4. advertisement and MarketingDue to the advertising techniques choose by all the manufacturers in the CC-Segment the sales switch risen drastically. It is all collectible to because the companies now a day are using even aggressive sell techniques for which they are even coping with the shoot celebrities and Cricket stars, like Maruti has undertake Irfan Pathan as the brand ambassador of Zen and for Santro Hyundai has contracted for Shah Rukh Khan. And the companies are even trying to begin to the customer as to in that location call for for a vehicle at extra interest loans, and so on They are using data according to the customersreturn and earning capacity for attracting the customers for there vehicles.5. Income of Consumer / BuyerThe income of the consumer or buyer of the car is a very important factor of require. In recent time we relieve onese lf seen that due to increase in the Income of the everyday public, there has been a shift from the abase CC-segment cars to the Upper CC-segmentcars.2Due to the recent increase in the issue forth of multinationals in India, the income level of the employees have risen drastically and has made CC-segment cars an first appearance level car for a mete out of people. The bonnie age of a CC-segment car owner has also dropped from 35 years to 31 years in India.6. affix In AffordabilityThe adopt for rider cars is impelled mainly by greater affordability, which in turn increases the aspiration level of the customers. straight off with high amount of disposable income in the hand of Indian youth, who forms major package of the population, PV securities industry has larger addressable trade place.7. demographic DriversCars being inspirational products, purchase decisions are playd by the all overall frugal environment. subjoin in per capita income increases the consumption t endency of the customer. exploitation in per capita income and rising aspirations and changing life style is leading to increased preference for cars over two-wheelers, which is also having a positive nark off on car demand.8. ExportsThe assign of exports from house servant production is currently at 12-13%, which is much lower than current export hubs. Currently, Indias share of worldwide passenger cars export volume stands at slight(prenominal) than 1%. But India is fast emerge as a manufacturing hub for leading global car makers, and several manufacturers have already firmed up plans for setting up manufacturing bases in India, which will also be utilize for exports.9. Presence Across SegmentsManufacturers with armorial bearing crossways various product segments can stop up higher(prenominal) volume and better capacity utilization by using the ballpark manufacturing capacity.Typically a customer upgrades from one segment to higher segment and the presenceacross vari ous segments ensures that the friendship retains its existing customers.10. Efficient Operations disputation in PV segment is very fierce and this requires the existing players to initiate steps to reduce their cost of production. legal and successful operation methods like broadcast commonality, reduction in vendor base and work force rationalization can help a comp all immensely.11. panoptic Dealer Network and Availability of payA wide dealer intercommunicate helps the company serve customers over wide geographical area. For e.g. Maruti has used its available wide ser wickednessnetwork as steer of difference over competitors. The companies are bind up with the financial institutions having agrarian presence to provide additional financing options to customers in such areas.12. Access to Latest TechnologiesIndian PV segment is highly competitive with as many as 14 players operate in it and more than 80 models on the offering. But still any new model launch meets with in crease in sales volume for the company. Moreover in a time when a satisfying portion of Indian customer is smell to upgrade in higher segment, companies with in vogue(p) technologies and latest models will catch more attentions.13. work outs of fruitThere are burn up factors of production which influence the append of a car like Cost of stark Material Labour Cost Machinery stimulus Cost These factors influence the supply of a car largely. If the cost of the raw corporeal (Steel, Spare Parts, Rubber) increases there will be an increase in the cost of production leading to decrease in profit margins. Costs like labour costs, machinery and input costs also influence the supply with the increase or decrease in these costs.7.14. Government Policies and TaxesIf there is a deviate in the governance policies regarding the increase in the road tax charged or the tax which is to be paid per unit sold, the supply of a car will fluctuate with the nature of the change. Recently the presidency has reduced the custom duty on inputs and raw material from 20% to 15% which has increased the supplyFactors affecting nifty food marketplace in India-The detonating device market is affected by a browse of factors. Some of the factors which influence great(p) market are as follows-A) Performance of domestic companies-The performance of the companies or rather in collective scratch is one of the factors which has direct cushion or effect on big(p) market in a country. fainthearted unified earnings foretell that the demand for goods and services in the providence is less due to slow branch in per capita income of people. Because of slow harvest-festival in demand there is slow emergence in employment which centre slow growth in demand in the border on future. therefore weak corporate earnings indicate average or non so good prospects for the economy as a whole in the near term. In such a scenario the investors ( twain domestic as fountainhead as fore ign ) would be wary to invest in the capital market and thus there is bear market like location. The reverse case of it would be robust corporate earnings and its positive wedge on the capital market.B) Environmental Factors-Environmental Factor in Indias context earlier means- Monsoon . In India around 60 % of verdant production is dependent on monsoon. thus there is heavy dependence on monsoon. The major chunk of agricultural production comes from the states of Punjab , Haryana & Uttar Pradesh. Thus deficient or hold up monsoon in this social occasion of the country would immediately affect the agricultural output in the country. Apart from monsoon early(a) natural calamities like Floods, tsunami, drought, earthquake, etc. also have an sham on the capital market of a country. The Indian Met Department (IMD) on twenty-fourth June stated that India would receive only 93 % rainfall of Long Period average (LPA).This piece of news directly had an sham on Indian capital mark et with BSE Sensex falling by 0.5 % on the 25th June. The major losers were automakers and consumer goods firms since the below prescript monsoon forecast triggered concerns that demand in the pivotal rural heartland would take a hit. This is because a deficient monsoon could seriously squeeze rural incomes, reduce the demand for everything from motorbikes to soaps and worsen a slowing economy.C) Macro Economic song-The macroeconomic metrical composition also influence the capital market. It includes big businessman of Industrial Production (IIP) which is released every month, annual Inflation number indicated by Wholesale Price Index (WPI) which is released every week, Export Import numbers which are declared every month, sum Industries growth rate. This macro economic indicators indicate the state of the economy and the direction in which the economy is headed and therefore impacts the capital market in India.D) Global Cues-In this military personnel of globalization vario us economies are mutualist and interconnected. An event in one part of the world is bound to affect other parts of the world, however the magnitude and intensiveness of impact would vary. Thus capital market in India is also affected by developments in other parts of the world i.e. U.S. , atomic number 63, Japan , etc. Global cues includes corporate earnings of MNCs, consumer confidence index in substantial countries, jobless claims in developed countries, global growth outlook apt(p) by various agencies like IMF, economic growth of major economies, price of natural oil, credit rating of various economies granted by Moodys, S & P, etc. An obvious example at this berth in time would be that of subprime crisis & recession. quoin started in U.S. and some parts of the Europe in early 2008 .Since then it has impacted all the countries of the world- developed, developing, less- developed and even appear economies.E) Political stability and government policies-For any economy to achieve and sustain growth it has to have political stability and pro- growth government policies. This is because when there is political stability there is stability and consistency in governments positioning which is communicated by means of various government policies. The vice- versa is the case when there is no political stability .So capital market also reacts to the nature of government, attitude of government, and various policies of the government.F) Growth prospectus of an economy-When the national income of the country increases and per capita income of people increases it is state that the economy is growing. Higher income also means higher disbursal and higher savings. This augurs well for the economy as higher expenditure means higher demand and higher savings means higher coronation. Thus when an economy is growing at a good pace capital market of the country attracts more money from investors, both from within and outside the country and vice -versa. So we can s ay that growth prospects of an economy do have an impact on capital markets.G) Investor Sentiment and essay appetite-Another factor which influences capital market is investor sentiment and their luck appetite. in time if the investors have the money to invest but if they are not confident about the returns from their investment , they may stay external from investment for some time. At the aforementioned(prenominal) time if the investors have low risk appetite , which they were having in global and Indian capital market some four to five months back due to global financial meltdown and recessionary situation in U.S. & some parts of Europe , they may stay away from investment and wait for the right time to come. peril involved in this sector. Labour hullabaloo and industrial action. Unexpected delays and cost run down due to. Overlapping government jurisdiction. Corruptions and bureaucratic inefficiency. Slow down in government decision due to political instability. stark nak ed material price. Restructuring of Automobile company financial Allocation and cash flow run Chain Operational Efficiency blunt Material prices Fuel Efficien segment battle Fuel Prices Demands Emerging markets