Automobile Industry in India: PESTEL Analysis and Porter's Diamond Model

The report provides external analysis of the factors that affect automobile industry in India. As such, various models have been used including PESTLE and Porter’s diamond model. Indian has been provided with favorable environment for businesses and investment which is attributed to political stability, and revision of goods and services taxes, low labor costs, rapid urbanization, rising income levels, rise of technology which gives incentives for development of hybrid vehicles. However, the automobile industry is affected by legislation for cleaner transport as well as the compliance with international safety standards that sometimes inhibit their production.

AUTOMOBILE INDUSTRY IN INDIA
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Executive Summary
The report provides external analysis of the factors that affect automobile industry in India.
As such, various models have been used including PESTLE and Porter’s diamond model.
Indian has been provided with favorable environment for businesses and investment which is
attributed to political stability, and revision of goods and services taxes, low labor costs, rapid
urbanization, rising income levels, rise of technology which gives incentives for development
of hybrid vehicles. However, the automobile industry is affected by legislation for cleaner
transport as well as the compliance with international safety standards that sometimes inhibit
their production. The Porter’s diamond model considers factor such as the strategies of the
firms, demand and competition. The report also discusses two theories that explain the rise
and development of automobile industry in India which include Vernon’s international
product life cycle and Hofstede cultural dimensions. To ensure that there is continued
investment in automobile industry in India, the reports suggests that the following should be
taken into consideration; development of infrastructure, support of innovation, development
of human capital, introduction of sustainable initiatives and introduction of long-term policy
roadmap.

Contents
1.0. Introduction.........................................................................................................................5
2.0. PESTEL analysis.................................................................................................................5
2.1. Political factors................................................................................................................5
2.2. Economic factors.............................................................................................................6
2.3. Social factors...................................................................................................................7
2.4. Technological factors......................................................................................................8
2.5. Environmental factors.....................................................................................................8
2.6. Legal factors....................................................................................................................9
3.0. Porter’s diamond model....................................................................................................10
3.1. Firm strategy, structure and rivalry...............................................................................10
3.2. Factor conditions...........................................................................................................11
3.3. Demand conditions........................................................................................................11
3.4. Related and supporting industries.................................................................................12
3.5. Chance...........................................................................................................................12
3.6 Government....................................................................................................................12
4.0. Vernon’s international product life cycle..........................................................................13
5.0. Hofstede cultural dimensions............................................................................................14
5.1. Power Distance..............................................................................................................15
5.2. Individualism.................................................................................................................15
5.3. Masculinity....................................................................................................................15
5.4. Uncertainty avoidance...................................................................................................15
5.5. Long-term orientation....................................................................................................15
6.0. Recommendations.............................................................................................................16
6.1 Level of corruption.............................................................................................................16
6.2 Ease of doing business.......................................................................................................17
6.3 Country of origin effect......................................................................................................17
6.4 Regulations to protect Investors.........................................................................................18
6.5 Encouraging Foreign Direct Investment............................................................................18
7.0 Recommendations..............................................................................................................19
8.0 Positioning..........................................................................................................................20

9.0 Comparative analysis.........................................................................................................22
10 Conclusion...........................................................................................................................23
10.1 Overall market attractiveness.......................................................................................23
10.2. .....................................................................................................................................24
References................................................................................................................................25

1.0. Introduction
India is categorised as a leading emerging market economy. It is one of those former
developing economies which have achieved significant industrialisation, modernisation and
rapid economic growth (Hamilton and Webster, 2015). Regarding the automobile sector, at
present, the country ranks 4th in Asia and 9th worldwide among the world’s largest automobile
manufacturers. Several leading automobile manufacturers including ISUZU Motors, Ford
Motors, Honda and Suzuki Motors have heavily invested in India’s automobile
manufacturing industry. Thereby, establishing new assembly lines, manufacturing, and
Greenfield units. With the current pace of growth, India aims to become the third largest
automobile manufacturer in the world by the year 2020 (India Briefing, 2017).
2.0. PESTEL analysis
There are several macroeconomic factors which have helped in India becoming a prime
market for automobile manufacturers. According to Ho (2014), .PESTEL analysis is a
framework which is used in analyzing as well as monitoring macro-environmental factors or
rather the external factors which directly or indirectly impacts the organization (p.6480).
They include Political, Social, Economic, Technology, Environmental and Legal factors as
discussed below.
2.1. Political factors
 Positive government outlook
The government has played an active role in developing the automobile manufacturing
sector. First and foremost it adopted a liberalisation policy and allowed 100% Foreign Direct
Investment in the industry. Moreover, it introduced several policies and measures to boost
sector growth. One such plan was the Auto Policy implemented in the year 2000. The policy
aided the development of vehicles driven by alternative energy sources, raised production and
availability of auto components, and developed safety methods aligned with international
standards (Invest in India, n.d.). Recently, the government implemented two plans including
the Automotive Mission Plan and National Electric Mobility Mission Plan (NEMP). The
former aims to triple industry revenues by 2026 whereas the latter aims to raise local
emission standards to be at par with global standards (Gupta, 2018).

 Revision of Goods and Services Taxes (GST) structure
The government is also planning to exercise a revision in the current GST structure. This is
likely to have a positive impact on the automobile manufacturing sector. This reform is
expected to positively impact vehicle pricing, sourcing strategies, distribution costs and
dealer profit margins. The elimination of the tax on movement of goods across interstates is
expected to lower logistics costs for manufacturers. Moreover, it will increase transparency
and ease tax compliance and administration and lastly it would reduce the cost of doing
business for automobile distributors (EY, 2016). The graph below shows the political
stability index (-2.5 weak or 2.5 strong). The data ranges from 1996 to 2017 with the average
political stability index of India being -1.14, with the lowest being -1.51 in 2003 and the
maximum is -0.83.
Accessed from https://www.theglobaleconomy.com/India/wb_political_stability/
2.2. Economic factors
 Low labour costs
One of the most lucrative factors for foreign manufacturers is the low average wage rate in
India and an abundance of labour. As compared to other BRIC countries such as Brazil and

China the average monthly and minimum monthly wages in India are considerably lower. For
instance, the per hour wage rate in India is only $0.9 as compared to $12 in Brazil and $2.8 in
China (EY, 2016) As such, the labor cost of South Asia labor is generally low as compared
to Southeast Asia. However, Indian costs of labor is $110 is lower than Vietnam’s labor cost
of $158, Indonesian ranked at $159 and China’s cost ranked at $310.
Accessed from http://economists-pick-research.hktdc.com/business-news/article/Research-
Articles/Make-in-India-Comparative-Production-Costs-of-Selected-Indian-States/rp/en/
1/1X000000/1X0A6T6F.htm
2.3. Social factors
 Rapid urbanisation
Owing to rapid urbanisation over the next decade over 500 million people are expected to be
living in cities. This is likely to rapidly increase the demand for passenger cars (EY, 2016).
 Rising income levels
By the year 2025, over 60 million Indian households will enter the consuming class having an
annual income higher than $8000. Furthermore, the workforce participation rate is expected

to rise to 67% by 2020 with more women and youth being employed thereby increasing the
demand for mobility (EY, 2016).
2.4. Technological factors
 Incentives for development of hybrid vehicles
In 2015, the Indian Government launched a scheme for the Faster Adoption and
Manufacturing of Hybrid and Electric Vehicles (FAME) to incentivise the development and
manufacture of hybrid/electric, full hybrid and pure electric vehicles. The plan is expected to
achieve a penetration rate of 6 to 7 million cars by 2020 (India Briefing, 2017). The graph
below shows the changes that technology have had in the automobile industry.
Accessed from https://www.google.com/search?
q=graph+of+technological+development+in+automobile+in+india&client=opera&tbm=isch
&tbo=u&source=univ&sa=X&ved=2ahUKEwjUjdyE6efeAhUMCxoKHZepASUQsAR6BA
gEEAE&biw=721&bih=456
2.5. Environmental factors
 Legislation for cleaner transport
Owing to the global trend of switching to cleaner modes of transportation, the Indian
Government has decided to skip the Bharat Stage (BS) V emission standards and directly
adopt the BS VI norms by the year 2020. This initiative will align Indian motor vehicle
emission regulations with the more stringent European Union emission standards for light-
duty cars and commercial vehicles (International Council on Clean Transportation ICCT,
2016).

Furthermore, the government is expected to introduce a formal “end of life” policy for
vehicles which were manufactured before the BS I standard was launched. This initiative will
provide consumers with incentives and tax rebates for scrapping old cars and replacing them
with greener and more fuel-efficient new age vehicles (Khan, 2017). The millions of cars in
the Indian streets emit tons of exhaust gases that cause air pollution. Environmental
legislation have been established to prevent more emission of carbon gases that would
otherwise pollute the environment. The table below shows the extent at which the gases are
emitted.
Pollutants Pollution load (in tons/day)
Carbon monoxide 217.7
Hydrocarbons 66.7
Nitrogen oxide 84.1
Particulate matter 9.7
Sulphur dioxide 0.72
Accessed from https://automotivelectronics.com/vehicular-pollution-india/
2.6. Legal factors
 Compliance with international safety standards
The Indian government has drafted several policies to ensure that all manufactured vehicles
adhere to international standards. For instance, crash tests were made mandatory for all new
models post 2017. For this purpose over seven world class testing centres have also been set
up (EY, 2016). The regulations have been enacted to reduce the increasing number of
accidents as shown in the figure below. Comparing China and India, India has registered a
higher number of accidents than China and hence more regulations are need to curb the
menace.

Accessed from https://www.google.com/search?
q=table+of+car+accidents+in+India&client=opera&tbm=isch&tbo=u&source=univ&sa=X&
ved=2ahUKEwjXo8DZ7efeAhWPxYUKHbwwBMYQsAR6BAgEEAE&biw=1326&bih=62
7#imgrc=Nhwzy0QQvp3-WM:
3.0. Porter’s diamond model
Porter’s diamond model also referred to as the theory of international competitive advantage
of industries can be used to explain the success of the Indian Automobile manufacturing
industry globally. Porter’s diamond model is a diamond-shaped framework that emphasizes
on why certain industries in a nation are competitive internationally whereas others are not
(Bakan and Doğan, 2012p.450). The model also examines why some companies are more
innovative as compared to others. The key factors include:
3.1. Firm strategy, structure and rivalry
This factor refers to the degree of internal competition within the industry. The higher the
degree of competitiveness the higher is the likelihood of companies developing unique and
sustainable competitive advantages. India has a highly competitive market landscape with
several local and international players vying for market share. In the passenger vehicle

segment, the major players include Maruti Suzuki, Hyundai, Mahindra, Honda, Toyota, Ford
and General Motors. Moreover, the competition is expected to increase with automakers
planning to invest a cumulative value of INR 6,000 billion in the sector within the next few
years.
3.2. Factor conditions
This factor refers to the natural, capital and human resources present in a country/region. First
and foremost, India has an abundant labour pool with low labour costs specialising in labour-
intensive manufacturing. With the rapid increase in the scale of operations, demand for
skilled labour is also likely to increase. Hence, the government has initiated the “Skills India”
program to dispatch skill development schemes for over 500 million youth by the year 2020.
Moreover, the National Skills Qualification Framework (NSQF) has also been developed to
standardise the competency framework and standards for different trades in the industry.
Furthermore, leading OEMs are also investing in collaborations with universities for
employability skill enhancement programs, externship programs and joint certification from
training centres (EY, 2016).
Another critical factor is the governments focus on enhancing the industry’s Research and
Development (R&D) and innovation capacity. At present 8% of India’s total R&D
expenditure is dedicated to the automotive sector, and over 30 private automotive R&D
centres are active in the region (EY, 2016)
3.3. Demand conditions
This factor refers to the nature of consumer demand which encourages manufacturers to
improve their quality of production, Due to increasing population, rising income levels and
rapid urbanisation India is likely to experience a surge in demand for vehicles. At present
only 20.3 out of every 1000 Indians own a car, and this figure is expected to increase to 29.5
per 1000 by the year 2021 (National Auto Policy, 2018). Moreover, according to the Indian
Government’s Automotive Mission Plan, 2016-2026 vehicle sales are expected to reach 66
million units by the year 2026 (EY, 2016).
Furthermore, the new Goods and Services Tax (GST) structure is likely to stimulate demand
since tax rates would be reduced for small cars by 2% and SUVs by over 12% (Thoppil,
2018).

3.4. Related and supporting industries
This factor refers to the presence of supporting industries including key component
manufacturers. The entry of global Original Equipment Manufacturers (OEM) has helped
local manufacturers gain exposure to global standards and advanced technologies for
manufacturing. Moreover, tie-ups with local companies have helped foreign OEMs achieve a
high degree of localisation in the Indian market. As a result, the auto parts industry
experienced a stable growth of 11% in the year 2015. Furthermore, the increase in demand
for vehicles is likely to propel the growth of the auto component sector by a Compound
Annual Growth Rate (CAGR) of 13% (EY, 2016).
3.5. Chance
While Porter did not originally discuss anything about chance, the significance of chance is
usually included in the Diamond Model as the probability that external events which include
natural catastrophes and wars that can have a great impacts in the operations of the
organization. Chance also incorporates random events that go beyond the control of the
company or even the government (Smit, 2010 p.15). A good example of such event is the
September 11 terrorist attack which inhibited the import of goods from Mexico and this
negatively impacted the exporters in Mexico. With regard to India, a good example is terror
attack that happened in capital Mumbai on 26th November 2008. The attack targeted the
international visitors and this negatively impacted foreign visitors who had come to invest in
India.
3.6 Government
Government has been described as the catalyst and challenger and in this case, Porter does
not believe that there could be free market. Therefore it is practically impossible for the
government to leave economy in invisible hands. Nevertheless, Porter does not consider
government as an important supporter of the organizations since its only companies that
create competitive markets but governments cannot. Sölvell (2015) notes that essentially, the
role of the Indian government is to encourage and push companies so that they can raise
aspiration and create a competitive environment (p.468). In addition to this, the government
may stimulate this by creation of infrastructure, improvement of health sector, education
system, encouraging change and also promotion of local rivalry through the establishment of
anti-trust laws.

4.0. Vernon’s international product life cycle
Another theory which can be used to explain the widespread growth of the automobile
industry in India is Vernon’s International Product-Life cycle theory. Product Life Cycle
Theory is thus defined as the theory that states that during the initial stages of a product, the
parts and the labor associated with that product originates from the area in which it was
invented (Zeschky, Widenmayer and Gassmann, 2014p. 261). Once the product has been
adopted and used in other places around the world, then production moves away from the
area the production started. The model claims that each product passes through various
stages in its lifecycle. In the first stage, the product and all its components are only produced
in the inventing country, the second stage involves expansion of production facilities and
exports, and the final step involves production being shifted to developing countries with the

inventing countries acting as importers. This model can be used to analyse the Indian
automobile industry.
Initially, in the year 1928, General Motors set up its first assembly plant in India and
produced India’s first assembled car. Other manufacturers including Ford Motor Co. and
Addison and Co. followed suit. However, owing to the nationalisation and adverse licensing
policies the growth of the manufacturing industry remained slow. However, in the 1980’s
with the liberalisation of Foreign Direct Investment (FDI) policies Asian companies
including Suzuki were allowed to form joint ventures in the market. Finally in 1993, when
new entrants were given free entry to the market several leading companies including
Daewoo, Kia and Honda entered the market. Furthermore, in 2001 the government allowed
manufacturers to import car parts for assembly which further led to more German companies
such as Mercedes, BMW and Audi to expand to India (Aghinotri and Chaturvedi, 2013).
Over the last five years, the number of automobiles manufactured in India has experienced a
CAGR of 7.06% and has increased to 29.07 million units as of 2018 (India Brand Equity
Foundation, 2018).
Moreover, the rise in consumer demands and increase in expenditure on R&D has
encouraged auto manufacturers to shift towards manufacturing green vehicles, including
electric cars. As a result of these advancements, India has now become a leading exporter of
automobiles. Few of the leading exporters from India include Ford, Maruti Suzuki and
Honda. This increase in exports has helped major players improve their capacity utilisation
and achieve economies of scale (Modi, 2018). Over the past five years, the number of
automobiles exported has increased by a CAGR of 6.86% from 2.9 million in 2013 to 4.0
million in 2018.
5.0. Hofstede cultural dimensions
The culture of the country also has a significant impact upon the industrial sector. Hofstede
cultural dimensions was developed by Geert Hofstede and it shows the effects the culture of
the society on the values of its members and relationship between the values and the behavior
of the people. The theory has become an internationally recognized standard for
understanding differences in the culture. Regarding India, the different cultural dimensions
can be analysed using the Hofstede model.

5.1. Power Distance
India scores unusually high on this dimension thus indicating a strong preference for
hierarchy and a top-down structure within organisations. In India, the hold of power within
organisations is highly centralised, and employees expect to be closely monitored and
directed by their managers. Moreover, the style of communication is very formal whereby
employees avoid sharing negative feedback with the top management (Hofstede-Insights,
n.d.).
5.2. Individualism
India maintains an intermediate score for this dimension whereby the society can be
categorised as having both collectivistic and individualistic traits. The collectivist aspect is
reflected by the efforts of team members to be accepted within the extended social framework
and acting in favour of one’s defined in- group. On the other hand, individualistic tendencies
are displayed by each individual accepting the responsibility for his/her actions (Hofstede-
insights, n.d.)
5.3. Masculinity
India scores very highly on this dimension and can be considered a masculine society.
Whereby, individuals focus on the accumulation of material wealth and display of signs of
success and achievements (Hofstede-Insights, n.d.).
5.4. Uncertainty avoidance
India has a median score of 40 on this dimension, thus indicating a medium-low preference
for uncertainty avoidance. Hence, people are comfortable with status quos and norms and are
not driven to take action initiatives to change set routines (Hofstede-Insights, n.d.)
5.5. Long-term orientation
India scores a median score of 51 on this dimension. Hence, it exhibits traits of both
normative societies which prefer to preserve time honoured traditions and pragmatic societies
which encourage efforts in modern education to form new traditions for the future (Hofstede-
Insights, n.d.).

Accessed from https://www.google.com/search?
q=Hofstede+cultural+dimensions&client=opera&hs=9ir&source=lnms&tbm=isch&sa=X&ve
d=0ahUKEwjI5ILIiejeAhVL1xoKHTuaCMAQ_AUIDigB&biw=721&bih=456#imgrc=Saup
cBPOh611uM:
6.0. Recommendations
6.1 Level of corruption
India has been ranked 81st out of 180 countries on the global corruption index by
Transparency International. The index ranks countries based on the perceived level of
corruption in the public sector. India’s latest score out of 100 was 40 which reflects a high
degree of corruption (Economic Times, 2018).
Moreover, the high degree of corruption dissuades foreign investors from investing in the
country. According to Kroll’s global fraud report, nearly 20% of foreign investors/companies
are discouraged from doing business in India owing to corruption, unstable corporate
governance and high risk to the security of assets. Furthermore, the country is also touted to
have the highest bribery rate across the Asia Pacific region. Whereby, businesses are
expected to pay handsome bribes to avail public services (The Hindu, 2017).

Regarding the automobile industry, bribery and corruption were found to be rampant in
several avenues. Across several instances monetary and non-monetary benefits were seen to
be extended to government officials in exchange for fake emission test results, unfairly
negotiating fleet sale contracts, unjustly obtaining bulk sale orders and overlooking non-
compliance to government regulations (Singh, 2016).
However, the country still promises a relatively higher growth rate as compared to other
emerging market economies. Furthermore, the recently elected government has initiated
several programs to curb corruption levels. These include the introduction of regulations
including the Insolvency and Bribery Code (IBC), real estate and regulatory act (RERA) and
revised GST rates (The Hindu, 2017).
6.2 Ease of doing business
In the past few years, India has substantially improved its ranking for ease of doing business
on the World Economic Forum ranking. As of 2018, India has improved its ranks by 30
points is now among the top 100 countries for ease of doing business (EY, 2016)
According to the World Economic Forum India is ranked 30th across more than over 100
countries on the global manufacturing index, which compares and contrasts the
manufacturing capabilities of different countries. This is primarily due to the Make in India
initiative pursued by the government which helped India improve on 9 out of 10 critical
parameters on the ease of doing business. Few of these include the new trade policy which
removed import taxes on small volumes of goods and offers incentives to export-oriented
units (EY, 2016).
Moreover, improved labour laws provide single window operations for companies to process
provident fund, pension and employee insurance processes. Furthermore, regulatory
compliance processes have also been simplified, and companies can now issue environmental
approvals and licences online (EY, 2016).
6.3 Country of origin effect
Consumers all around the world are found to have a preference for brands originating from a
particular country also referred to as the Country of Origin of the Brand (COB). Likewise,
they may also have positive or negative perceptions of the Country of Manufacturing (COM)

of the brand. According to research conducted on the global automobile industry, consumers
have an unfavourable opinion of cars manufactured in developing countries (Fetscherin and
Toncar, 2010). Hence, most companies in India still take pride in their Country of Origin and
benefit from the positive impact of COB on consumers. However, over time India’s
perceived image is also improving, and it now ranks 35 out of 75 countries on the Country
Brand Index (Future Brand, 2015).
6.4 Regulations to protect Investors
Currently, India has become a hub of businesses activities but there is one challenge in that
some policies scare away investors and this might have negative impacts in the automobile
industry. There are regulations that have been established such as the Forward Contracts
(Regulation) Act which regulated the commodity market. The government has also
established Forward Market Commission and it has merged the same with Securities
Contracts Regulation Act which has prevented undesirable transactions in securities and this
has encouraged foreign investment (Luthra, 2011 p.240). However, there is still need to
establish policies that regulate automobile industry by ensuring there is level ground for
competition. This will be an effective way of building trust on the foreigners and they will be
willing to invest in India.
6.5 Encouraging Foreign Direct Investment
In 2016, the Indian government amended the Finance Act 2013 which catered for investors
outside the jurisdiction of the Indian economy. However, this is not enough to encourage
more investors in Indian and with this regard, it will be prudent to ensure that Indian
government provides incentives to the investors by reducing tariffs on the imports of spare
parts used in the manufacture of automobiles (Ray, 2011 p.160). This will have a direct
impact on the level of investment in India and it will encourage more local and international
investors.
7.0 Recommendations

To ensure continued investment in the automobile sector, it is critical that the Indian
government keeps itself abreast of the latest trends in automobile manufacturing. Moreover,
to continue attracting foreign investors the government should.
1. Develop infrastructure
The government should improve the planning of rural road networks to stimulate demand for
automobiles in other regions of the country (Mathur, Sen and Kidambi 2013).
2. Support innovation
According to industry estimates leading auto suppliers spend around 5% to 10% of their
revenues on R&D activities, however, in India, the rate is less than 1%. Hence, the
government should provide incentives to auto suppliers and assemblers to invest in such
initiatives. This will help meet current industry demands as well as future demands by
electric and alternative fuel vehicle manufacturers (Mathur, Sen and Kidambi 2013).
3. Develop human capital
With the rapid increase in the scale of operations across the automobile industry, the demand
for skilled labour is expected to increase substantially. Hence, it is necessary that the
government ensures that adequate human resources are available at affordable rates. Thus, in
addition to implementing the on-going initiatives like Skill India, it is recommended that the
government focuses on creating a wider talent pool. This can be done by targeting rural India
along with Tier 2 and 3 cities through offering automotive-focused courses in collaboration
with regional universities and vocational centres (Mathur, Sen and Kidambi 2013).
4. Introduce sustainability initiatives
To make India an attractive manufacturing hub with the potential of catering to several export
markets, it is necessary that the government pursues sustainability initiatives. These include
road safety policies, improved vehicle safety systems and efficient emission controls which
are aligned with global standards (Mathur, Sen and Kidambi 2013).
5. Introduce a long-term policy roadmap
The government should introduce clear and precise short, medium and long-term policy
roadmaps for the automotive industry, to help automobile and parts manufacturers plan their
capacities and future investments accordingly. The few recent abrupt policy changes such as

the adoption of the BS-VI emission norm instead of BS-V severely impacted the production
plans of several leading manufacturers. Moreover, a comprehensive plan aligning future
technologies would also be beneficial in encouraging OEM and component manufacturers to
invest in R&D initiatives (Money Control, 2018).
8.0 Positioning
8.1 Marketing Mix
8.1.1 Product
When talking about product of the automobile sector, it essentially relates to how the
company deals with various things which include the tangible and the intangible products. As
such, tangible products include cars, trucks, buses whereas the intangible products include
insurance, financing facilities and after sales services. Product in an automobile industry also
relates to width of the industry and this include the product line of cars and the automobiles
while the length is determined by the total number of products produced in the industry.
8.1.2 Price
The price of the automobiles is basically the cost that the consumer pays for the vehicle and
this includes the early payment discounts and financing. However, different automobile
products have different pricings and this implies that the models have different targets such as
the BMW which targets the middle class.
8.1.3 Place (Distribution)
The place in automobile covers the manufacturing distribution network of the automotive
industry. For instance, BWM has its facilities in Chenna. Additionally, place refers to the
distribution channels through which the cars are imported all over the world.
8.1.1 Promotion
There are a lot of promotional activities in which automobiles are involved in. For instance,
advertisement of the automobiles is conducted through the televisions and cinema
commercials. Public Relations are also heavily used in events like trade fairs and
sponsorships.

8.2 Product Life Cycle
Product Life Cycle states that after a certain age the product grows at its peak and when it
reaches saturation stage, it slowly gets out of the market. Let’s consider Mahindra’s ‘Bolero’,
which was first manufactured 12 years ago but it still offers significant threat to its
competitors. Maruti Alto was first released in 2000 but in 2011, it was still among the best-
selling car in India. However, the market has changed as the modern generation is interested
in freshness and novelty.
8.3 Corporate Social Responsibility
Automobile industry in India puts CSR as a priority as manufacturers must adhere to business
ethics which focus on environmental stewardship. There are regulations that requires the
companies to be energy efficient, reduce carbon emissions and reduction of wastes. In
addition to this, the industry is concerned with the workers’ rights and thus they ensure that
they are compensated fairly and there is also transparency in procurement. The companies in
the automobile industry have been encouraged to be socially, environmentally and ethically
responsible.
8.4 Competitive Advantage
Competitive advantage in automobile industry in India is grounded on the following areas;
cost, service, quality, innovation, brand and convenience. The top automobile companies in
India that pose competition against one another are Tata Motors, Hindustan Motors Limited,
Ashoke Leyland, Maruti Suzuki India Limited, Hyundai Motor India Limited and Bajaj Auto.
Competitive advantage is also brought up by high efficiency, warehouse management and
reduction of inventory.
8.5 Perceptual Mapping
Perpetual mapping is a technique which helps an investor to identify new opportunities where
new products can be developed. Consumer perceptions are hugely used in the production of
multi-dimensional perceptual mapping. In automobile industry in India, the following are
aspects considered to give new business ideas such as the definition of the brand, services
given by the existing automobiles as well as the costs.

8.6 Building Strong Brand
Branding is a fundamental factor in business success and automobile industries thrive to
establishing an effective brand so that they can increase their competitive edge. As such, the
industries focus on whether their brands represent low-cost but high quality. Brand equity is
also a factor that is considered and this helps the company to sell its products more than their
competitors. Brand associations has also been an important aspect considered and it is
achieved through sponsorships, celebrity brand ambassadors and advertising.
9.0 Comparative analysis
A comparative analysis of two emerging market economy countries is performed using a
decision matrix as shown in Figure 2. The weight is allocated on a scale of 0 (least important)
and 5 (most important). Whereas, the relative scores are assigned on a scale of 0 (lowest) to
100 (highest). As shown in the figure, India outweighs Brazil in numerous avenues such as
the capacity for innovation, pay and productivity, and strength of investor protection. Hence,
the cumulative total indicates that it is a better alternative for automobile manufacturing
companies.

Criteria Weightage
Strength of investor protection 4 69 276 87 348
Quality of overall infrastructure 3 18 54 54 162
Inflation 2 12 24 7 14
Local availability of specialised training services 4 20 80 51 204
Effect of taxation on incentives to invest 4 10 40 76 304
3 8 24 26 78
Buyer sophistication 2 39 78 85 170
Pay and productivity 4 11 44 67 268
Cooperation in labour-employer relations 4 25 100 44 176
Availability of financial services 3 20 60 57 171
FDI and technoloy transfer 4 60 240 41 164
Availability of latest technology 3 35 105 28 84
Local supplier quality 3 28 84 31 93
Local supplier quantity 3 61 183 47 141
Capacity for innovation 4 27 108 58 232
University industry collaboration in R&D 4 45 180 74 296
Total Score 1680 2905
Brazil
marks
alloted Brazil
Subtotal
India
Marks
alloted India
SubTotal
Business impact of rules on Foreign Direct
Investment (FDI)
Figure 1 Country comparison table
10 Conclusion
10.1 Overall market attractiveness
The overall attractiveness of India as an international automobile manufacturing hub can be
assessed by evaluating the relevant benefits, costs and risks associated with doing business in
the country. As shown in figure 3, few of the most significant costs of doing business in India
include the high degree of corruption, inadequate supply of infrastructure, inflation and
restrictive labour regulations (World Economic Forum, 2018). Furthermore, the degree of
political risk is low since the present government has been consistent with its programme of
reforms which included the effective demonetisation policy launched to tackle the black
economy (Societe Generale, n.d.). Likewise, the degree of economic risk is also moderate
since mostly positive changes to the country’s business environment are expected in the near

future (Global Edge, n.d.). On the other hand, numerous benefits such as ample supply of
cheap labour, growing consumer demand and increasing technological advancements have
made India a lucrative ground for foreign automobile manufacturers.
Figure 2: Overall market attractiveness
10.2.
Overall
Market
Attractiveness
Benefits
Rapidly growing population
Government initiatives such as
Make in India
Availability of labour
Improved GST structure
Risks
Consistent policies of current
Government
Positive economic impact of government
Costs
High degree of corruption and bribery
Infrastructure still under development
Low availability of latest technologies

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