History Of the automobile industry

The automotive industry began in the 1890s with hundreds of manufacturers that pioneered the horseless carriage. For many decades, the United States led the world in total automobile production.

In 1929 before the Great Depression, the world had 32,028,500 automobiles in use, and the U.S. automobile industry produced over 90% of them. At that time the U.S. had one car per 4.87 persons. 

After World War II, the U.S. produced about 75 percent of world's auto production. In 1980, the U.S. was overtaken by Japan and became world's leader again in 1994.

In 2006, Japan narrowly passed the U.S. in production and held this rank until 2009, when China took the top spot with 13.8 million units. With 19.3 million units manufactured in 2012, China almost doubled the U.S. production, with 10.3 million units, while Japan was in third place with 9.9 million units.

Economy Around the world, there were about 806 million cars and light

trucks on the road in 2007, consuming over 260 billion US gallons (980,000,000 m3) of gasoline and diesel fuel yearly. 

The automobile is a primary mode of transportation for many developed economies. The Detroit branch of Boston Consulting Group predicts that, by 2014, one-third of world demand will be in the four BRIC markets (Brazil, Russia, India and China).

Other potentially powerful automotive markets are Iran and Indonesia. Emerging auto markets already buy more cars than established markets. According to a J.D. Power study, emerging markets accounted for 51 percent of the global light-vehicle sales in 2010. The study expects this trend to accelerate

World Motor Vehicle Production

For many decades, the United States led the world in total automobile production.

In 1929 before the Great Depression, the world had 32,028,500 automobiles in use, and the US automobile industry produced over 90% of them. At that time the U.S. had one car per 4.87 persons. 

After WWII the U.S. issued 3/4 of world's auto production. In 1980 the U.S. was overtaken by Japan and became the world's leader again in 1994. In 2006, Japan narrowly passed the U.S. in production and held this rank until 2009, when China took the top spot with 13.8 million units.

By producing 18.4 million units in 2011, China produced more than twice the number of automobiles made by the U.S. in second place with 8.7 million units, while Japan was in third place with 8.4 million units.

Global Production of Motor Vehicles by Year

Country wise Distribution of the automobile market

Hybrid and electric vehicle cars by big Brands

Toyota – Prius, Camry Hybrid, Avalon Hybrid, Highlander Hybrid

Honda- Insight, Civic, Accord Ford- Escape, Fusion Hybrid Chevrolet- Saturn Vue Green Line,

the Saturn Aura Greenline and the Mailbu Hybrid, Silverado

Standalone Players in the EV segment

Miles Electric Vehicles - Founded in 2004, this company already makes and sells two low-speed electric vehicles which are manufactured in China

Zap! Electric Cars- Zap has numerous retail locations in the United States, and sells cars made by other manufacturers.

Global Electric Motorcars (GEM) — GEM is a division of Chrysler and has the look and feel of a start-up

Fly Bo- Produced in China distributed in the United States. Tesla- A company based in united states BYD- Believe your dreams, a company based in China Reva- A company based in India, now owned by Mahindra

and Mahindra.

PEST ANALYSIS

Political: China

In June 2010, the government announced the Green Car Subsidy Trials in five  pilot  cities. Subsidies  of  up  to  60,000  RMB   ($8,784)  would be given for  purchasers  of  pure  electric  vehicles   and plug- ‐in  hybrids.

Also the  in the same year,  the  local  government of Shenzhen  announced that the city will  have  24,000  electric  vehicles  and   12,750  charging  stations  by 2012  

The government also committed that in  the  next  10  years,  Chinese  government  will   grant  100bn  RMB  to  support  new  energy  cars

Economical: China  Year 2009:  13.7  million  motor  vehicles  manufactured  

in  China, surpassing  Japan  as  the  largest   automobile  manufacturer  in  the   world  

Year2010:  Chinas  share  of  the  global  electric  vehicle   market  will  grow  from  2.7  percent  this  year  to  35   percent  by  2020

China has  19%  world  population  but  less  than  1%  of   world  oil reserves  

In2010  China  invested  $34.6  billion  in  wind,  solar,   and  other  green   energy  products  

Social: China

According  to  a  recent  survey,  60%  of  Chinese  respondents   show  a  strong  interest  for  electric  vehicles

The  average  age  of  Chinese  car  buyers  is  35  compared  with  50   in  the  U.S.  and  Europe      

Electric  mileage  and  reliability  of  new  energy  are    main   concerns  for  buyers  of  EVs  

98%  of  urban  Chinese  are  concerned  with  climate  change,   among  which  69%  are  willing  to  change  their  living  habits  

Technological: China

Main  technologies:  hybrid,  electric,  fuel- ‐cell     Worldwide  increases  in  the  price  of  petroleum  caused  

automakers  to  release  hybrids  (e.g.  Toyota’s  Prius),  now  a   core  segment  of  the  automotive’s   future

The  future  of  electric  vehicles  depends  primarily  on   cost  and  availability  of  batteries  with  high  energy  densities,   power  density,  and  long  life.

Political: India Indian Government has changed its role from controller to

facilitator with prime focus on providing better infrastructure, growth oriented economic policies and right

environment to attract investments. This has made giant auto manufacturers enter into India and affect the competitive environment.

The liberalization steps, such as, relaxation of the foreign exchange and equity regulations, reduction of tariffs on imports, and refining the banking policies, have played an equally important role in bringing the Indian Auto- motive industry to great heights.

The government is likely to grant 30% subsidy to the Electrical Vehicle producers. The level of incentives which the government is thinking is to the tune of Rs 12,000 crore over the next seven years, till 2020. On an average about Rs 2,000 crore will be provided as incentive, which is a big sum.

Also the auto manufacturers are seeking zero percent import duty.

Economical: India Rising GDP consecutively for the last 5

years has led to increased purchasing power and hence the automobiles

Per capita Income is rising , which is affecting the segments of automobiles being ventured into

Increasing urbanization of rural India also has given rise to increase in sales

Social: India Social Environment: The demand of cars has been fueled

by following factors : Indian families are becoming increasingly nu-clear

Increasing Propensity to spend

Increasing distances between work-place and residence

The number of Indians who are concerned about the environment are increasing day by day.

Charging stations are a major concern in the minds of the Indian people.

Technological: India Rising costs of petrol and diesel has

given rise to increasing use of vehicles which use alternate fuels like CNG, LPG, electric vehicles etc instead of conventional fuel. 

SWOT ANALYSIS OF INDIA, CHINA and UNITED STATES

Strength

Consumers buy EVs for two main reasons. First, it’s an ideological choice, based on reducing emissions and persevering the environment. Second, it’s an economic choice, with the motivation being reduced fuel bills

Since EVs don’t have any emissions, they’re considered safer for the environment. Unfortunately, while EVs don’t have harmful greenhouse gas emissions, much of our electrical grid is powered by fossil-fuels like coal.

As for the economic side of the equation, EVs not only eliminate the gas pump, but also make for reduced transportation costs as electricity is far cheaper than gas. There’s a psychological component as well, with buyers feeling as though an EV is a once time purchase, with the cost of “filling up” mentally associated with the utility bill. As an added bonus, since EVs don’t have as many moving parts as a traditional vehicle, they’re usually cheaper to maintain.

There’s even an advantage to those who like to get going in a hurry – electric motors don’t have to rev up like an internal combustion motor. The torque is instantly available from the moment you touch the throttle. They’re responsive, peppy and some would even say fun.

Weakness

  However, range on EVs is quite limiting and public charging

stations are not nearly as abundant as gas stations. Pair that with the long recharge times and it’s easy to see why an EV isn’t the perfect car the majority of drivers.

Longer trips may exhaust an EVs range and have you searching for public charging stations along your route. This means that EVs are typically ideal for those who dwell mainly in cities where there are shorter commutes and more local charging stations. However, if you live in a condo or apartment, having your own dedicated outlet for charging your vehicle or even a level 2 charging station might not be possible

Opportunity  Demand Drivers - Increasing Crude Oil Prices, Import

Dependency & Sustainability, Low maintenance and operational costs, Increase in demand for green cars in overseas markets, Manufacturers providing incentives to attract consumers, Government Initiatives

Future market - Cumulative Future EV Potential by 2020, Based on OEM’s Sales Target, Based on Government Target, Electric Cars Forecast, Hybrid Cars Forecast, Future Outlook - OEMs Perspective, Future Outlook - Government’s Perspective.

 

Threats

Key challenges - Purchase Price, Driving Range, Charging Time, Delay in Government action on plans, Charging Infrastructure, Battery Technology & Battery Pricing, Lack of availability of spare parts

Government Regulations & Initiatives - MNRE Scheme, State Subsidies, Budget 2012-13, National Mission for Hybrid and EV, NEMMP 2020, estimated investments, Government target, Installed Base, Global Market Share Model (GMS), CP Model and other regulation in different countries is also threat for electric cars Market

Current Scenario Porters 5 forces Indian EV Industry

EV Industry In ChinaTHREAT OF ENTRYLow Threat of entry•Capital requirement•Government and legal barriers•Economies of scale•Absolute cost advantage•Product differentiation•Access to distribution channel

SUPPLIERSLow Relative power

Power battery suppliersPrice sensitivity

Bargaining power

Electric motor suppliersPrice sensitivity Bargaining power

BUYERSPrice Sensitivity and High Bargaining Power

DealersPrice sensitivityBargaining power

Private customersPrice sensitivityBargaining power

Substitutes-short distanceHigh ThreatGasoline carsElectric bicyclesMotorcyclespublic transportationTraditional taxi

Substitutes: long distance Train

VWToyota

GMHyundai

HondaNissanChery

FAWGeely

BYD

0% 5% 10% 15%

Chinese market share200

92008

INDUSTRY RIVALRY High

EV Industry In USA

Rivalry Among Existing Competitors: High (7)•Rivalry in the US and the global automotive industry is intense. •Great diversity of rivals in terms of cultures •High fixed costs associated with manufacturing cars and trucks and the low switching costs for consumers when buying different makes and models further heighten the rivalry. •Main competition seems to be Tesla themselves. GM Volt, Nissan Leaf, Mazda hydrogen vehicles will be competition..

Bargaining Power of Buyers = LOW (1)- •Tesla Motors does not sell products in bulk-• Do not have standard products. •Tesla automobiles are very unique in the industry.• Buyer power is extremely low due to the fact that there are few competitors

Bargaining Power of Suppliers: Low (3)•Many firms rely on one or two automakers to buy a majority of their products. •The supplier firms must contend with substitute products for sale to the industry.• If automaker decided to switch suppliers, it could be detrimental to the previous supplier’s business.• Suppliers are susceptible to the demands and requirements of automobile manufacturer = very low power..

Threat of Substitutes: LOW (3)• There are few substitutes as well. Substitutes include: Hybrids*Public Transportation*Hydrogen Vehicles-• These substitutes are of lower quality Electric vehicles are differentiated when compared to transportation listed above. (Electric sports car vs. either a hybrid or a sports car. Not both.)

Threat of New Entrants/Barriers to Entry: High (8)•There is slight product differentiation in the cars such as hybrid versus fuel. •The switching cost is high. In order to switch to another industry almost nothing from the automobile industry can be transferred.•There is a need for strong brand identity and to differentiate from other car makers. Since most cars are relatively similar. Customers will buy more for the brand than the car.

Origin Of Electric Cars

India-REVA Mahindra Reva Electric Vehicles Private Limited,

formerly known as the Reva Electric Car Company, is an Indian company based in Bangalore

The Reva Electric Car Company (RECC) was founded in 1994 by Chetan Maini

A joint venture between the Maini group and AEV LLC Reva was acquired by Indian conglomerate Mahindra &

Mahindra in May 2010 Mahindra Reva currently produces two versions of

the REVAi, an urban electric micro-car  The REVA went on sale in India in 2001 

China-BYD BYD Auto Co., Ltd. is a Chinese automobile manufacturer based

in Shenzhen,Guangdong Province

Founded in 2003, following BYD Company's acquisition of Tsinchuan Automobile Company in 2002

BYD Co Ltd began as a rechargeable-battery factory competing in the Chinese market against Japanese imports

In 2008, BYD Auto began selling its first mass-produced, full hybrid vehicle, the BYD F3DM

BYD Auto may have been created in the absence of a State policy explicitly supporting independently owned automobile manufacturers.

USA- TESLA Tesla Motors was incorporated in July 2003 by Martin

Eberhard and Marc Tarpenning The Tesla Roadster, the company's first vehicle, is the first

production automobile to use lithium-ion battery cells. Tesla was the first car company to have fully repaid the

government, while Ford, Nissan and Fisker had not. Tesla Motors signed a production contract on 11 July 2005

with Group Lotus to produce "gliders“ Tesla's strategy was to emulate consumer electronics'

products and enter the automotive market with an expensive high-end product targeted at affluent buyers

Electric Vehicles : A Global Perspective

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Electric Vehicles : A Global Perspective

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Electric Vehicles : A Global Perspective

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TESLA INTERNATIONAL DISTRIBUTION

•Covers a Global Market Share of 8.4% in the Electric Vehicle Industry

•Major Player in U.S and Canada

•Currently planning to enter China

•Has opened a small facility in Tilburg, Netherlands for assembling Model S components shipped from California to Europe , to cater to the demand in Europe

•The following slide exhibits the Tesla dealers distribution in various parts of the world

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REVA DISTRIBUTION NUMBER OF DEALERS BASED

ACROSS INDIA

• 3ANDHRA PRADESH

•3CHANDIGARH• 2GUJARAT

• 6KARNATAKA

•4KERELA

•5MAHARASHTRA

• 5NEW DELHI

•2WEST BENGAL

• The Mahindra Group’s manufacturing expertise and wide global distribution network will help Mahindra Reva scale up production

•Mahindra Reva, has signed a memorandum of understanding (MoU) with the government of Bhutan, to promote the usage of electric vehicles in their country

•They launched their all-electric, zero-emission ‘Mahindra e2o’ in Thimphu, the capital city of Bhutan. 

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BYD – INTERNATIONAL JOURNEY

BYD has production bases in 23 countries, a majority of them planted in China

BYD through it’s joint venture with Daimler AG , German Company will soon sell a single product under the Denza brand name. Targeting up market Sedan 

Maximum Sale in China

While the majority of sales are domestic, some models are exported to other developing countries like Bahrain, The Dominican Republic , Ukraine and Moldova

Plans to enter the European and Israeli market.

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BYD OPERATIONS

Production

Bases

Xi’an

Shenzhen

Beijing

Assembling

Units

Russia Ethiopia R&

D Units

Shanghai

Shenzhen

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Diamond Model

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Diamond Model for TeslaDemand Condition• Based in California , U.S the largest market for Ev. • US market is growing with 26% share of Global Sales • Top 5 markets in US – Atlanta , Washington D.C, Portland , Los

Angles and San Diego• Growing markets Globally – China ( 30-35% of sales),

Netherlands , Norway, Japan

Factor Conditions • Production based in Fremont , California• . Looking at a Lithium battery manufacturing plant ( Texas,

Mexico, Nevada and Arizona are the prospect states )• Decision Based on climatic conditions and Terrain as the plant will

use solar and wind power.• Major Subsidies and Tax Exemptions -

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Diamond Model for TeslaRelated Supporting Industries

• Major ingredient in EV manufacturing is Lithium Batteries – Russia has the largest lithium battery manufacturing plant – Liotech

• Panasonic is the sole supplier• Backward integration strategy. Manufactures it’s own Batteries . Plans

to start world’s biggest Li-ion battery factory by 2016• OEM strategy• Own line of Charging stations (U.S – 64 , Europe – 14) . Free charging for

lifetime • Switching cost of Charging Station is Very High. Customer have to pay

very high fee to charge from another player like Chargepoint

Firm Strategy and Rivalry • Differentiation strategy in the U.S and European market• Targeted towards the Elite, offers High –End EVs’. Focusing on Features

and Performance • Lower Price Points –Plans a Cost Leadership Strategy in China• Global competitors are Chevrolet Leaf and Toyota Prius due to their low

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Diamond Model for BYDDemand Condition• Increasing Pollution leads to demand for Electronic Vehicles in the

Public Transportation Industry. • Intercity travel in China is rare. Practical benefits –Short Commutes

and Traffic Lowers Speed• China growing with 16 % share of Global Sales• Top 5 markets in China – Shanghai, Shenzhen, Hangzhou, Hefei

and Changchun• Potential and Current markets Globally – London( electronic buses)

Factor Conditions • Large Population – Cheaper Labor Cost for Assembly Line Production

in China• BYD F3 model is assembled in Russia ( Market Expansion) and

Ethiopia ( Cheap Real Estate and Labor)

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Related Supporting Industries • Started as a Lithium Battery Maker for Cell Phones , Forward

Integration to Electric Vehicles• Supporting Infrastructure Industries – Joint Stock Company with

People’s Republic of China ( PRC).• Charging stations infrastructure is developing - 2351 stations by

2015• Subsidies paid directly to the car makers – Overall Lower Prices

Firm Strategy and Rivalry • Cost Leadership strategy in China• BYD strategy's is based on focus, brazenness and precision• Rather than waste effort creating new models for the sake of variety, a

limited number of resources are spent on developing key products. That's the company's focus.

• BYD is known for picking up the best-selling products and blatantly copying them

• Competition from Tesla , Ford and GM

Diamond Model for BYD

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Diamond Model for REVA

Demand Condition• Highly underdeveloped EV market in India , but With fuel prices soaring –

EV is the future• M&M plans long – term benefits• M&M targets to sell 400 to 500 EVs a month• Delhi will be the biggest market (anticipated 150 to 200 unit sales per

month)• Plans to launch in the Europe market M&M wanted to enter Europe with an

EV Factor Conditions • M&M has invested Rs 100 crore to produce 30,000 units annually of the

e20 at its Bangalore facility• Already existing infrastructure of Mahindra makes India a preference for

production base • Lack of supplier for Li-ion batteries locally • Society of Manufacturers of Electric Vehicles (SMEV) was formed in 2008 ,

to promote the EV manufacturing industry . This indicates opportunity for M&M Reva for a stable support in future Indian market

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Related Supporting Industries • M&M plans to tie-up with public sector oil companies to incorporate

charging points for electric vehicles at petrol pumps across the Delhi• Currently there are 100 charging stations in Delhi• Battery is supplied by Samsung SDI and Bosch – Costs Rs.2.5-3 Lac per

car • Lackluster attitude of Indian Government towards promoting EV caused

Reva to hunt markets in Bhutan

Firm Strategy and Rivalry • Differentiation Strategy instead of Cost Leadership• Looking for the first movers advantage in India• Extension of the Mahindra Brand• Focus on innovation – tie up with Vodafone• Plethora of Competitors. International – GM with Chevrolet Spark and

Chevrolet Beat Electric, Toyota –Prius. National Players like Tata Motors with Vista EV

Diamond Model for REVA

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Recommendations for Reva Reva is a new brand and will face tough competition

from international manufacturers like Tesla, Nissan, GM M&M must explore markets where Mahindra’s hold is

strong, like South Africa One of the probable market for Reva could be

Singapore due to : Robust Electricity Power Grid Warm Climate that doesn’t drain the battery life as in cold

climates No long distance drives required in a country 30 miles wide But issue of Lack of Government Incentives. Hence ,

differentiation strategy could work, by positioning Reva as premium brand , on the lines of Tesla

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Sources

http://www.ibtimes.com/you-wont-believe-where-electric-car-demand-growing-fastest-us-hint-its-not-california-1557593

http://business.financialpost.com/2014/03/14/how-tesla-motors-incs-electric-car-batteries-are-adding-to-chinas-pollution-woes/?__lsa=8a5e-bc10

http://www.dailytech.com/California+Gives+Tesla+Motors+347+Million+Tax+Break+to+Boost+Vehicle+Production/article33961.htm

http://www.wantchinatimes.com/news-subclass-cnt.aspx?cid=1206&MainCatID=12&id=20140318000005

http://www.theguardian.com/world/2014/feb/25/china-toxic-air-pollution-nuclear-winter-scientists , Jonathan Kaiman in Beijing

theguardian.com, Tuesday 25 February 2014 16.00 GMT

http://www.meleszenawi.com/chinese-automaker-build-your-dreams-auto-opens-a-new-assembly-plant-in-ethiopia/

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Sources http://www.forbes.com/sites/peterdetwiler/2014/03/13/build

ing-out-the-electric-vehicle-charging-infrastructure-greenlots-advocates-for-open-standards/ , Peter Kelly-Detwiler, 3/13/2014 @ 10:20AM

http://www.businessinsider.com/here-is-exactly-how-warren-buffetts-chinese-auto-company-byd-copied-competitor-designs-piece-by-piece-2010-2?IR=T , VINCENT FERNANDO FEB. 11, 2010, 1:04 AM

National Competitive Advantage of China in Electric Mobility: The Case of BYD , http://www.ciam.rwtaachen.de/media/Doks/100501_CIAM_BYD.pdf

http://www.mahindra.com/What-We-Do/Automotive/Companies/Mahindra-Reva-Electric-Vehicles

http://forbesindia.com/blog/business-strategy/why-the-economics-of-mahindra-reva-e20-dont-work/

http://www.newindianexpress.com/business/news/article1514417.ece#.Uyn4LPmSzd0

http://automotivehorizon.sulekha.com/samsung-sdi-partner-bosch-to-supply-lithium-ion-batteries_newsitem_3481

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