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Automotive Industry Analysis in BRIC Countries - Case Study Example

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This research will begin with the statement that BRIC countries refer to Brazil, Russia, India, and China who are now considered as a host of promising and emerging market and show the possibilities of being the most influential economies in the 21st century…
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Automotive Industry Analysis in BRIC Countries
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Automotive Industry Analysis in BRIC countries BRIC countries refers to Brazil, Russia, India and China who are now considered as a host of promising and emerging market and show the possibilities of being the most influential economies in the 21st century. China and India have been forecasted to be the first and third economies in the world by 2050 with Brazil and Russia occupying the fifth and sixth places. (Global Sherpa. org) Shown in Annex 1 are its development indicators that showed China as an emerging leader. These figures are significant in figuring out decisions of priority for investment. Below is a competitive company analysis of key players in the automotive industry in each country and its corresponding market share. 1.Brazil – Key company players Market share Volkswagen 23% Fiat 20.6% General Motors 18.4% Ford 9.4% Source: Research and Market Other companies who are trying to compete in the market are Nissan, Hyundai of Korea and Cherry Automobile Co. of China. 2. Russia Key players Units sold in 2010 Renault Model: AVTOVAZ 27 % market share SOLLERS Top model: AUZ 4.4 % market share GAZ 4% of market share Source: Reuters Feb. 24, 2011 Renault - car sales is estimated to reach 2.9 million units by 2010. (Reuters)There is no available data to testify if it has reached this estimate to date. Renault sold 517,147 units in 2010. French company, co-owned by Moscow Bank and Russian Tech Sollers sold 83,810 units in 2010. It is a Russian company with 300,000 annual manufacturing capacity. Partnership, with local owner holding a controlling stake. GAZ sold 76,646 units in 2010. A Russian company controlling share; set an alliance with GM Motors to develop new model of Chevrolet Aveo at GAZ facility. Leading companies operating under local partnership are Renault, Nissan, General Motors, Volkswagen, Toyota, Ford and Fiat 3. China Key players Market share Volkswagen 13% General Motors 9% Toyota 7.5% Hyundai 7.0% Honda 6.5% Nissan 6.0% BYD 5.0% Cherry 5.0% KAI 3.2% Suzuki 2.8% FAW 2.5% GELLY 2.6% FORD 2.6% Source, Hunkar, David. (May 2, 2010) Volkwagen entered the Chinese market in 2010; opened a factory with an annual capacity of 300,000 units. It was able to sell 2.26 million units in 2011. Company structure is partnership with the government. GM is a joint ownership with the government, 33% owned by US counterpart. Company sold 231,183 units in 2011 Toyota is a joint venture, had a little difficulty in getting into the China market. Sold 883,000 units in 2011 Hyundai a Seoul based manufacturer; sold 757,833 passenger vehicles, price is cheaper Honda sold 350,494 units in Jan-June 2012. An increase of 125.6% from last year’s sales. Has affiliates in China, manufactures, and distributes automobiles. 4. India Key players Market share Maruti Suzuki 53% Hyundai 21.0% Tata 12.0% Mahindra 5.8% GM 4.0% Honda 3.5% Toyota 3.4% Ford 2.0% Source. Hunkar, David (May 2, 2010) Ford is at the tail end in terms of market share in all four BRIC countries. Industry outlook. Country assessment shows growth of GDP is highest in India and Brazil that is forecast to be maintained up to 2015. In the same way Brazil and China both showed a lower country risk than the United States (EIU 2011 Country Assessments Consumer Industry). Country risk is the probability of loss due to economic or political instability in the buyer’s country that results to inability of paying for imports. Country risk of Brazil and China is in the range of 65% while US is at 80%; where 0= good and 100 is bad. This means both Brazil and China are both strong countries, economically speaking taking into consideration of the country risk assessment which means they are capable of importing automobiles. Its GDP for personal growth shows it can sustain the importation of goods, albeit, automobiles. As to growth of personal income, it appears, India is estimated to have 11.2 %, growth, the highest among the BRIC, next is China with an estimated 8.1% growth, then Russia and Brazil maintaining same 4.1 % (EIU BRIC Eeconomic forecasts. Aug. 2011) China – Auto production in this country had increased rapidly, from only 2 million in 2000 to 17 million cars, minivans, SUVS, and sport utility Vehicles in 2010. It is considered as twice the size of US and Japanese; and far larger than the European’s car manufacturing sector. China is both a manufacturer and buyer. The country has great growth potential because the number of families that can afford a car is expected to leap from 10 million in 2005 to 75 million in 2015. The government is developing a car culture in China.(Hays, Jeffrey, April 2012) Brazil - despite the economic recession, sale of cars and SUV in this country is anticipated to increase by 10% to 20% in 2011-2014. According to RNCOS Industry Research Solutions , the country produced 3.64 million vehicles, The industry is dominated by passenger car segments. Government supports flex-fuel system of vehicles. The Flex-fuel system accounted for the 81% of automobile sales in the industry. Russia -Russia’s automotive market is the second largest in Europe, after Germany, and shows growth potential. Car density is 250 cars per 1,000 people as compared to 515 cars in Germany and 643 cars in the U.S. (See Annex 2) Local brands dominate sale of cars, since they are more affordable to Russian consumers. It is expected that Russia’s accession to WTO, lowering import duties on commercial vehicles, will lead to a significant increase on imported vehicles. (Ernst & Young, February 2012) India –Market outlook is promising especially in small car segments. Sales is expected to grow by CAGR 10% from 2010-2018. Car density is only 11 cars per 1,000 people (See Annex2). India has 1,241.9 billion population. Together with partnership with other car manufacturers, India succeeded in manufacturing compact cars and even exceeded China exporting compact cars for the first time, in 2009. According to ACMA, middle class will grow from 50 million to 550 million by 2025. Its continuous improvement in quality leads to export of automobiles and its components.(ACMA) Impact of key players to prioritizing decision The automotive industry in the BRIC economies is dominated by large players. It is going to have an impact in the company’s decision in prioritizing the countries in my global business strategy because these companies already holds significant market share. It will be difficult to compete with giants unless the company comes up with a different strategy, and these concerns are for the need for a cheaper price of car, a passenger type, and compact designs. There is a big market for cars in India and China because if its burgeoning population, rising income of the population and support of the government. Besides, China and India has the fastest GDP average growth rate among the BRIC counties. ANNEX 1 Annex 2. Source: Ernst & Young, February 2012 References Automotive Component Manufacturers Association of India (ACMA). Indian Auto ComponentIndustry. An Overview. Retrieved 31 July 2012 EIU 2011 Country Assessments Consumer Industry EIU BRIC Eeconomic forecasts. Aug. 2011 Ernst & Young, February 2012. An overview of the Russian and CIS Automotive Industry. Retrieved 31 July. 2012. Global Sherpa. . Bric Countries- Background, Latest News, Statistics, and Original Articles. Retrieved 31 July 2012 from http://www.globalsherpa.org/bric-countries-brics Hays, Jeffrey,April 2012) Chinese Mobile Industry and Sales of Chinese Cars Abroad. http://factsanddetails.com/china.php?itemid=361&catid=9&subcatid=61 Hunkar, David (May, 2010) Top Auto Companies in China, India. Seeking Alpha. Retrieved 31 July, 2012 from http://seekingalpha.com/article/202264-top-auto-companies-in-china-india RNCOS. March 2011. Brazil Automobile Forecasts to 2013. Retrieved 31 July 2012 from http://www.rncos.com/Report/IM227.htm Research and Market. (2012) Brazil Automobile Forecast in 2013. Retrieved 31 July 2012 from http://www.researchandmarkets.com/research/d8a5ea/brazil_automobile Reuters. February 24, 2011. FactBox Carmakers fight for slice of Russian market. Reuters edition US. Retrieved 31 July 2012 from http://www.reuters.com/article/2011/02/24/russia-autos-idUSLDE71L21U20110224 . Read More
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