1

Participants

• Hafiz Awais

• Rai Bilal Mushtaq

• Ali Javed

• Naveed Shoukat

• Abdul Rafah

2

Automobile

Industry Analysis

3

AUTOMOBILE INDUSTRY

An industry that produces automobiles and

other gasoline powered vehicles, such as

buses, trucks, and motorcycles.

4

INTRODUCTION

• Started in Pakistan when the first automobile plant was set up in May 1949 by General Motor & Sales Co

• According to Ministry of Industries, Pakistan produced its first vehicle in 1953, at the National Motors Limited

• Manufacturers from the US collaborated with Pakistani businessmen to set up; Ali Automobiles to manufacture Ford Products in 1955

• The end of the seventies all automobile assembly in Pakistan stopped, until 1983 when Pak Suzuki started manufacturing their vehicles in Pakistan.

5

INTRODUCTION(CONT.)

• The Industry highly regulated in early 1990’s

• Further Toyota Indus Motors was set up in 1990, followed by Honda

• Key driving sector of the economy

• Motorcycle production hit the country's record level of over 1.5 million units in 2010-2011.

• Car industry saw boom in 2006-2007 when sales touched record peak of 180,834

6

MARKET STRUCTURE

• The auto industry is considered to be an

oligopoly.

• Today there are 15 companies in production of

which 5 are automotive producers and 10 are

commercial vehicle producers.

7

MAJOR ASSEMBLERS

• Toyota

• Indus Motors

• Pakistan Suzuki

• Honda Atlas

• Diwan Farooq Ltd

8

Analysis Of the

Industry

9

PEST ANALYSIS

10

POLITICAL:

– Government imposes limit on the number of parts to be imported

– Legislations require locally made parts to be international

standards compliant

– Fluctuations of exchange rates & oil prices

– Foreign ownership regulations and technological cooperation’s

with other governments.

– Trade and tariff policy related motor vehicles

– Motor vehicle insurance policy

11

PEST ANALYSIS

LEGAL:– Business law protects companies from unfair competitions.

– Legislation protects the interests of society.

– Law To protect consumers from unfair business practices.

– At present vehicle imports are subject to six ‘fixed’ taxes

• Ports Authority Levy (PAL) of 5%,

• Nation Building Tax (NBT) of 3%,

• Social Responsibility Levy (SRL) of 1.5%,

• Road and Infrastructure Development Levy (RIDL) of 2.5%,

• Value Added Tax (VAT) of 20%

• Customs Import Duty (CID)

• Excise Duty.

12

PEST ANALYSIS

ECONOMIC:

– Rise in inflation car manufacturers to increase their prices

– As parts are imported, the Exchange rate should effect

– High Rates of Oil & Gas

– Increase in income level

– Interest Rate also affects car prices

– Increase in Imports

13

PEST ANALYSIS

SOCIAL:

– Car Culture

– Fashions and taste

– Increased desirability of Customized cars.

– Consumer Attitude

14

PEST ANALYSIS

TECHNOLOGICAL:

– Electronically Controlled

– Gas-electric hybrid and Hydrogen-powered

fuel

– New technologies lead to growth in the

sales figure.

– Consumer satisfaction.

15

PEST ANALYSIS

16

Porter Five Forces

THREAT OF ENTRY (weak)

• Large amount of capital required

• Few legal barriers protect existing companies from new entrants

• All automotive companies have established brand image and reputation

• Products are mainly differentiated by design and engineering quality

• It is very hard to achieve economies of scale for small companies

• Governments often protect their home markets by introducing high import taxes

17

Porter Five Forces

BUYER POWER (Strong)

• There are many buyers

• Corporate or governments usually buy large fleets and can bargain for lower prices

• It doesn’t cost much for buyers to switch to another brand of vehicle or to start using other type of transportation

• Buyers can easily choose alternative car brand

18

Porter Five Forces

SUPPLIER POWER (Weak)

• Large number of suppliers

• Some suppliers are large but the most of them are pretty small

• Materials widely accessible

• Suppliers do not pose any threat of forward integration

19

Porter Five Forces

THREATS OF SUBSTITUTES (Weak)

• There are many alternative types of transportation, such as bicycles, motorcycles, trains, buses or planes

• Substitutes can rarely offer the same convenience

• Alternative types of transportation almost always cost less and sometimes are more environment friendly

20

Porter Five Forces

COMPETITIVE RIVALRY (Very Strong)

• Moderate number of competitors

• If a firm would decide to leave an industry it would incur huge losses, so most of the time it either bankrupts or stays in automotive industry for the lifetime

• Industry is very large but matured

• Customers are loyal to their brands

• There is moderate threat of being acquired by a competitor

21

Porter Five Forces

Key Success Factors in the

Automotive Industry• The key success f actors of any industry are indicators or

milestones that measure your business achievements and help

determine how well you are progressing towards your goals and

objectives.

Following are the KSFs f or the auto industry of Pakistan

• Positive Image

• Low Cost Provider

• Distribution Network

• Cash Flows

• Compliance

22

Key Success Factors in the

Automotive Industry (Cont…)

• Flexibility

• Establishment of export markets

• Use of most efficient work practices

• Effective cost controls

• Access to the latest available and most efficient

technology and techniques

23

TOYOTA

• Founded in 1937, Toyota Motor Corporation is a Japanese

company that engages in the design, manufacture,

assembly, and sale of passenger cars, minivans,

commercial vehicles, and related parts and accessories

primarily in Japan, North America, Europe, and Asia.

• Current brands include Toyota, Lexus, Daihatsu and Hino.

• Toyota Motor Corporation is the leading auto manufacturer

and the eighth largest company in the world.

• As of March 31, 2013, Toyota Motor Corporation’s annual

revenue was $213 billion and it employed 333,498 people.

24

SWOT ANALYSIS OF

TOYOTA

25

Strengths

• Strong market position and brand recognition

– ) Market Share• 45.5% in Japan

• 12.2% in North America

• 13.4% market share in Asia (excluding Japan and China)

• 4.3% market share in Europe

• Strong focus on R&D

– Improved• the functionality,

• Quality

• Safety

• environmental compatibility

• Extensive production and distribution network

– 50 manufacturing companies

– 27 countries and regions besides Japan

– produced 3,940,000 vehicles in Japan

– 3,495,000 vehicles across other manufacturing locations

Weaknesses

• Product recalls could affect brand image – In 2011, Toyota recalled 111,000 models of Toyota and Lexus

brands’ vehicles due to shutdown of the hybrid system

– Toyota recalled 181,000 vehicles in Japan in relation to abnormal noise and oil leakage

– In addition, the company was involved in government investigations related to product recalls.

• Declining sales in key geographic segments – North America, Asia, Europe and other geographic region, which

together accounted for 60.8% of the total revenues of the company

• Poor allocation of resources as compared to peers– Honda Motor's ROE was 4.8%, while Nissan Motor's ROE was

8%

– In contrast, Toyota's ROE was 2.7%

Opportunities

• Growing global automotive industry – Downturn in 2008-2009

– Rebound in 2011-2012

– Global automotive manufacturing industry grew by 8.9% in 2012 to reach a value of $1,563.9 billion

• Toyota poised to benefit from growing partnership with BMW – Strategic collaboration on technological fields i.e

• Fuel cell system,

• Joint development of architecture

• Lightweight technologies

• Strong outlook for the global new car market

Threats

• Intense competition

– Intensifying in light of continuing globalization

• Appreciating Japanese Yen a major concern

– More export charges

– More transaction and transportation cost

• Natural disasters could impact production structure

– Earthquake

– Flood

MARKETING MIX

Products PRICE

Place Promotion

30

MARKETING MIX

Products

1. Cars (Corolla, vitz, camry, etc.)

2. Trucks/SUV’s (Land Cruser, prado,

Highlander, etc.)

3. Lexus cars & SUV’s (Mark x, LX,

GX)

31

Price

1. Prices are varying in order to the vehicle and color.

• White (pearl white) and black colored vehicles.

• And in same car model, price is varying from grade to grade

• Brand name.

• Used technology and country of manufacturing.

32

Place

1. Dealership

2. Placement through Banks

3. Dealers in Lahore i.e Walton Moters, ravi moters.

4. Dealers in Karachi i.e Eastern Moters, Westren Moters ,etc.

33

Promotion

Toyota also taking advantage through advancement of technology

• Indus Motors Company has been applying promotion strategies in many ways

• By ads

• Giant Billboards at Bypass and super highway

• Sponsors in Games

• Participation in exhibitions

• Display centers

• Display in big Public market

• Brochures, name cards, etc

• Via emails

• web banners on famous and expensive sites of internet

34

RECOMENDATIONS

• Toyota should continue to do efforts to strengthen its management platform and raise corporate value and sales.

• Toyota should promote business and cost structure reforms to realize a solid management platform so that it can respond quickly to the changing market circumstances.

• To support consolidated management on a global scale, Toyota should enhance the power of the workplace and diversity in the use of human resources.

• Toyota should maintain a streamlined structure through the reduction of fixed costs.

35

36

37