AutobeiConsultingGroup: New Adaptive Methodologies could revive the struggling Automotive Industry

Friday 16 January 2015

New Adaptive Methodologies could revive the struggling Automotive Industry

"In 2009, after a meeting at BMW’s Munich Corporate office, as I reached the parking lot I found a flyer in Bayerisch German language. It was letter from BMW Union which says that BMW employees should drive BMW cars, as they are getting salary from BMW and in this difficult time you should sell off your non BMW brands and replace them with BMW. For this they have opened one small office for getting assistance. This was the time when German government started old scrap car scheme to increase sales."

The struggle in the automotive industry has been troubling OEs and suppliers and stake holders in India and abroad for some years now. Now as the Budget is approaching the industry is optimistic on a positive announcements. Certain sectors like CV, Tractors and Construction Equipment are highly dependent on market conditions. The automotive industry is affected by external market dynamics but as per the new study conducted by ACG this can controlled with greatest effect.

The study primarily focus on delivering how the automotive industry can come out of recession which will have a positive impact on many dependent industries. The secondary consideration is given on Safety aspects which will be become habit in India which will save lives on our roads.

An overview of the challenges for Passenger and Commercial vehicle Industry:

Indian Automotive Industry is showing de growth from last couple of years and seem to await tough times ahead.

Mainly there are two kind of challenges ahead for OE - Economy and Market Sentiments.

Some of the latest development happened which could give negative sentiments to market. Seasonal changes like Monsoon and external political scenarios like in Iraq and domestic Government policies have all had an effect.

Automotive Industry is already struggling on many fronts, on top of it market condition are not favorable to generate adequate sales. All stake holders including Central and State Gov. has to come forward and implement measures which will be profitable for all in long term.

There are three major ways to revive the Automotive Industry

Scrap of old vehicles as a part of combined effort by Government and OEs which promote to buy new vehicles. A similar approach was adopted by Germany during 2009-10. SIAM has also suggested same kind of scheme to Government of India.
Tax Relief: in Excise duty and other one all stake Holder of Automotive Industry take initiative. All OEMs working on optimal solution but lot of challenges are there on Market and product issue.
Create Demand: The downfall in sales is owe much to the weak market sentiments which we believe will carry on towards the next few quarters. As per ACG study, OEs must think of introducing new variants with advanced safety and comfort features implemented at minimum additional cost. This could thereby overcome the sentiments and create enough demands.

Purchase behavior - India

Price and after sales are two most important criteria in buying car in India. Meanwhile Safety and environmental friendliness are the least considered features according to Indian buyers. But the latter two are two indispensable part of road safety and the habit has to be induced into our buyers.

OEs should adopt steps to create awareness in users about the importance of safety features along with state/central governments devising steps for the same.

When Volvo car was launched with most equipped safety features in Sweden which had become premier choice for females mainly for those with children, however it was a bit too expensive.

If Stake Holders promote to buy vehicles with optimal safety features, it will beneficial to OEMs, Insurance Companies, Financiers and Suppliers. Also the impact on human lives will be massive.

Here are some of the safety features with their importance.

There are also interesting conclusions we had drawn that how few comfort features play important role in driving safety.

Implementation of advanced safety features will reduced considerable amount of road accidents

Commercial vehicle and Car constitutes major share of accidents in India which can be control through safety features.

If there safety features will be promoted by all stake holders then in this cycle all will be the beneficial in define time.

Automotive Industry Tax Structure:

Government could give some relief in its duty structure. For this category can be made for maximum benefits to industry.

As per ACG Revenue collection study 2012-13, it is shown that Tax revenue is almost increases every year. Now its Government turn to give some support to industry. As soon industry will revive, once again it is will give better return to Government.