Industry issues

Key issues facing companies in the automotive industry include:

Competitive pressures
Pressures in the highly competitive automotive manufacturing sector increase and over-capacity, particularly in vehicle assembly, mean that most suppliers face unrelenting price pressure. The rapid development of the lowcost labour economies in Eastern Europe, South East Asia, China and India is putting enormous pressures on labour intensive suppliers. The drive for lower costs and a technical edge are therefore vital for survival. Related reading:Autofacts 2010 Automotive Review

M&A and deals

Competitive pressures in the automotive manufacturing sector have made trade buyers selective, in turn leaving private equity groups as the only option for many corporate disposals. As industry pressures and cash flows become relatively predictable, private equity players have become more comfortable resulting in increased competition for automotive assets, pushing prices up. While the overall pace of industrial consolidation may have slowed, the presence of private equity has ensured the volume and valuation of transactions has remained buoyant.

Sustainability
Increasingly, environmental considerations and public opinion are driving manufacturers' decisions around the mix of materials used in manufacturing, the types of engine and the end of vehicle life (ELV). This impacts a manufacturer's choice of suppliers and life-cycle decisions (production, use, and end of life) and in turn, their self-assessment any supply changes will ultimately have on the environment. Manufacturers and parts suppliers are required to share environmental information and communicate their progress to NGOs and other public interest groups.

Supply chain management and cost reduction

In the age of global trading, supply chains never stand still. This dynamic environment means that there are always opportunities for companies to improve but seldom the chance to optimise their business performance, due to the ever-changing situation. Therefore, supply chain architectures must be kept under constant review in order for then to be both logistically efficient and cost effective.

Emerging markets
Rapid economic developments in emerging markets, notably China and India, are providing significant opportunities to increase sales and reduce costs. Western manufacturers and retailers are involved in a "land

grab" in key growth markets, involving securing the best suppliers in the face of competition from traditional direct competitors and from international suppliers who are seeking to tie up global pricing. Similarly, establishing presence and market share in the newly emerging markets is critical for the longer term success of these international companies.

Regulation
The Block Exemption Regulations that came into effect on 1 October 2003 were meant to "put consumers in the driving seat" - by giving dealers greater independence from carmakers, promoting inter-brand competition, liberalising the aftermarket and encouraging the harmonisation of prices across the region. As a consequence of Block Exemption Reform, the total number of sales outlets in Western Europe has declined prompting questions of how to better manage the retail network, improve the networks' reporting and performance, and train field staff.

Cars as status symbols

There will of course be also a certain demand for such cars in emerging countries. "But a bigger growth potential lies in cars that would serve as status symbols, such as SUVs," says Meyer. "That's where we see a difference in developments in emerging and developing countries."

Another hot issue for the industry is the growing importance of mobility services. Three quarters of respondents believe alternatives to the conventional owning of cars, such as car sharing and rent-a-car services, will be making inroads in many regions of the world. More than half the experts assume that cars will increasingly become part of mobility concepts including public transport.

Unbeatable combustion engines?

But the question that is probably hardest to answer at this stage is the one about which motor technology will eventually win out. With the recent hype about electric cars now subduing again, more and more experts believe that over the next five years, more resources will be spent on improving conventional combustion engines.

INDIA: Indian automobile industry constitutes two types of sub industries --those involved in building automobiles and others who're involved in building automobile components. The latter is the one where SMEs come into picture and would be our focus area here.

Automobile industry in India has huge potentials thanks to the growth of the middle class along with their overall economic growth. This is the reason of attraction for international brands who are trying hard to find new market for their products due to stagnated growth of auto sector in Europe, US, and Japan. Potential of Indian automobile industry can be best understood by following features: India is the second largest two wheeler market, fourth largest commercial vehicle market, eleventh largest passenger-car market, and fifth largest bus and truck market. With these facts in mind, let's talk about auto-component sector in particular. This segments is further divided into five sub segments --engine parts, drive transmission and steering parts, suspension and brake parts, electric parts, and body and chassis. According to the Automotive Manufacturers Association of India (AMAI), this sector is projected to grow at a CAGR of 10% till 2015-16; India is projected to be among top five automotive economies by 2025. The Indian automotive industry is largely classified in four clusters --Chennai, Pune, Pithampur, and NCR. In view of such huge potential, the Government of India has launched a 10-year plan -Automotive Mission Plan (AMP), 2006-16 which aims to make automobile industries' contribution to GDP more than 10% while providing employment to 250 lakh people.

Challenges in Automobile Industry Being a manufacturing vertical, usage of IT is always a challenge in this cluster. People especially those working at lower ranks are always skeptical about using IT which makes implementation and then execution of packages like CRM or ERP a big challenge. Automotive parts manufacturers or auto components industry is highly dependent on OEMs. This leads to pressure from OEMs for implementation of stringent controls over quality of component and reliability of delivery. In modern competitive environment local manufacturers of component are under huge pressure to adapt to global standards so that delivery and quality can be controlled. To overcome these challenges IT has a huge part to play. Challenges of automobile industry can be categorized into three levels depending on the size of the company. There are those who have basic IT structure in place and are looking to implement complex packages to gain competitive edge and then there are those who have small or negligible IT budget to lack of understanding about how IT can actually be helpful to them.

Supply chain This is an end to end system that involves tracking from raw material stage to the point when finished good is actually delivered to customer. This means that all the different suppliers and the main manufacturers have to align their process so that there is least inventory in the system. In fact the main agenda of supply chain is to somehow minimize capital tied in the inventory. Auto component manufacturers are suppliers to OEMs, therefore to get regular business they have to streamline their supply chain which can only be achieved by choosing a good SCM package

Inventory tracking Weather it is finished good, work in progress, or raw materials, it is always nightmarish to track inventory. Success and failure of SCM depends on how accurately can you track your inventory. One way to achieve this is using unique identification for each part which in turn can be achieved by RFID. Reaching out The only way to reach out to prospective customer is to get involved in activities through which one can get in touch with customers and understand their requirements; the most economical way to achieve same is using Internet. Start with creating social media page and add your customer, keep track of what customer needs and what industry trend is.

"Indian industries primarily depend on conventional energy. However, the cost of conventional energy is ever increasing and has a significant impact in terms of GHG"