Driving in Recession - a Challenging Journey of Automobile Sector in India

Driving in Recession - A Challenging Journey of Automobile Sector in India

ABSTRACT:

The Indian Automobile industry has been growing at a rapid pace. Indian & Multinational big giants like Maruti, Hyundai, Ford, G.M, M&M, TATA, Toyota, etc has proved it. But today recession has raised a lot of questions in front of these companies like how to attract customers? How to increase sales? To whom to sell? Where to sell? What strategies should use to cope with recession? In order to survive in this stiff competition a company needs to frame an Innovative Strategy. In the era of 21st century the manufacturer should always try to provide a rich experience to their customer so that the customer feels whatever they have purchased has some extra value. The company can focus on various strategies to grab the customer & major market share by: - Only selling benefits not Products, Promising a lot & delivering even more to customers, providing credit facility to customers, searching customer requirements, developing the best (ideal) pricing model for business. The purpose behind contributing this paper is to throw light on issues and challenges related to Automobile Industry in recession & to provide suitable strategies to cope up in the era of recession.

Key Words:

Recession, Innovation, Pricing Strategy, Pricing Strategy.

 Introduction of Recession:

A recession is a decrease of less than 10% in a country's Gross Domestic Product and due to this recession the manufacturers are failing to maintain the connectivity with their customers which results in confusion regarding what to sell? How to sell? Where to sell? To whom to sell? What strategies should adopt? Etc.

 Causes of Recession:

* Consumers loose confidence in the growth of the economy and spend less.

* Currency crisis

* Layoffs & Rise in Unemployment

* Energy crisis

* Negative sentiments regarding Stock Market

* Decrease in Production

* Financial crisis

 Effects of Recession:

* Bankruptcies

* Credit crunches

* Deflation (or disinflation)

* Foreclosures

* Unemployment

 Indian Automobile Industry: An Overview

The automotive industry is one of the core industries of the Indian economy. On the canvas of the Indian economy, auto industry occupies a prominent place. It has gradually strengthened its foothold in the international arena as well. The Indian auto industry is growing at a pace of around 18% per annum for the last five years. In the last decade their share in the Indian economy is around 5% of GDP. The industry is also making a contribution of 17% to the kitty of indirect taxes of the government.

 Few Highlights of Indian Automobile Industries:

* India is the world's largest two wheel manufacturer.

* India is the world's second largest tractor manufacturer.

* India has the fourth largest car market in Asia.

* India has the world's largest three wheeler market.

Market Share of Indian Automobile Industry:

 Challenges faced by Automobile Sector

* What to Sell?

* A Growing Competition

* Difficulty in diverting customer's mind.

* Poor operating performance

* Reduced profitability and increasing financial and bankruptcy risk

* Fuel Technology

* Nurturing Talented Manpower

 Automobile Industry in Recession:

Global recession has devastated the global auto industry with pinching effects on the Indian auto industry. India is a strong and growing economy but the hit of recession has put red marks on the entire balance sheet of the Indian economy.

A Survey of 125 companies by the commerce dept in New Delhi has revealed that Indian companies lost export worth Rs.1, 792 crores during August- October 2008 & were forced to lay off 65,000 workers.

The manufacturing sector, especially auto industry has also sustained a severe hit. As a result the global credit rating agency, Standards & Poor's (S & P) has downgraded Tata Motors rating for the foreign market. The company witnessed a 30% drop in sales in India compared to last year.

Among the leading car manufacturers, General Motors and Ford were the first one to file for bankruptcy. GM is struggling to stay alive and claims that the company has just enough cash to continue its operations. Even the merger talks of GM and Chrysler have been officially brought to a halt because of the liquidity crunch.

U.S sales have fallen down by 32% which has directly affected the Indian car industry where GM has recorded a fall of 45%, Ford of 30% and Chrysler down by 35%. All the three major car manufacturers have reported declined growth after the hit of recession.

Car market leader Maruti Suzuki India sales saw a decline of 24.84 per cent,