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 ve 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 R MB to support new energy cars

Economical: China

Year2009: 13.7 million motor vehicles manufactured in China, surpassing Japan as the largest automobile manufacturer in th e 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 sh ow 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 erns for buyers of EVs main conc

98% of urban Chinese are concerned with climate change, a mong 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 automa kers to release hybrids (e.g. Toyotas Prius), now a core seg ment of the automotives future The future of electric vehicles depends primarily on cost and availability of batteries with high energy densities, power dens ity, 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 Automotive 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 nuclear 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, its an ideological choice, based on reducing emissions and persevering the environment. Second, its an economic choice, with the motivation being reduced fuel bills

Since EVs dont have any emissions, theyre considered safer for the environment. Unfortunately, while EVs dont 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. Theres 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 dont have as many moving parts as a traditional vehicle, theyre usually cheaper to maintain. Theres even an advantage to those who like to get going in a hurry electric motors dont have to rev up like an internal combustion motor. The torque is instantly available from the moment you touch the throttle. Theyre 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 its easy to see why an EV isnt 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 OEMs Sales Target, Based on Government Target, Electric Cars Forecast, Hybrid Cars Forecast, Future Outlook - OEMs Perspective, Future Outlook - Governments 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 China
THREAT OF ENTRY
Low Threat of entry Capital requirement Government and legal barriers Economies of scale Absolute cost advantage Product differentiation Access to distribution channel

SUPPLIERS Low Relative power

INDUSTRY RIVALRY
High BYD Geely FAW Chery Nissan Honda Hyundai GM Toyota VW
Power battery suppliers Price sensitivity Bargaining power Electric motor suppliers Price sensitivity Bargaining power

Chinese market share

BUYERS
Price Sensitivity and High Bargaining Power

2009 2008

Dealers
Price sensitivity Bargaining power

Substitutes-short distance High Threat

Gasoline cars Electric bicycles Motorcycles public transportation Traditional taxi Substitutes: long distance Train

0% Private customers
Price sensitivity Bargaining power

10%

EV Industry In USA
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 Threat of New Entrants/Barriers fact that there are few competitors to Entry: High (8) There is slight product differentiation in the cars such as hybrid versus fuel. The switching cost is high. In Rivalry Among Existing Competitors: High order to switch to another (7) industry almost nothing from the Rivalry in the US and the global automobile industry can be automotive industry is intense. transferred. Great diversity of rivals in terms of There is a need for strong brand cultures identity and to differentiate from High fixed costs associated with other car makers. Since most cars manufacturing cars and trucks and the low are relatively similar. Customers switching costs for consumers when buying different makes and models further will buy more for the brand than the car. heighten the rivalry. Main competition seems to be Tesla themselves. GM Volt, Nissan Leaf, Mazda hydrogen vehicles will be competition.. 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 suppliers 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.)

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
The Mahindra Groups 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, zeroemission Mahindra e2o in Thimphu, the capital city of Bhutan.

3 3 2 6 4 5 5 2

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BYD INTERNATIONAL JOURNEY

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

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Diamond Model

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Diamond Model for Tesla

Demand 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 Paarul

Diamond Model for Tesla

Related 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 its own Batteries . Plans to start worlds 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 price

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Diamond Model for BYD

Demand 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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Diamond Model for BYD

Related Supporting Industries
Started as a Lithium Battery Maker for Cell Phones , Forward Integration to Electric Vehicles
Supporting Infrastructure Industries Joint Stock Company with Peoples 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
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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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Diamond Model for REVA

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
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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 Mahindras 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 doesnt 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-cardemand-growing-fastest-us-hint-its-not-california-1557593 http://business.financialpost.com/2014/03/14/how-teslamotors-incs-electric-car-batteries-are-adding-to-chinaspollution-woes/?__lsa=8a5e-bc10 http://www.dailytech.com/California+Gives+Tesla+Motors+347 +Million+Tax+Break+to+Boost+Vehicle+Production/article339 61.htm http://www.wantchinatimes.com/news-subclasscnt.aspx?cid=1206&MainCatID=12&id=20140318000005 http://www.theguardian.com/world/2014/feb/25/china-toxic-airpollution-nuclear-winter-scientists , Jonathan Kaiman in Beijing theguardian.com, Tuesday 25 February 2014 16.00 GMT http://www.meleszenawi.com/chinese-automaker-build-yourdreams-auto-opens-a-new-assembly-plant-in-ethiopia/
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Sources

http://www.forbes.com/sites/peterdetwiler/2014/03/13/building-outthe-electric-vehicle-charging-infrastructure-greenlots-advocates-foropen-standards/ , Peter Kelly-Detwiler, 3/13/2014 @ 10:20AM http://www.businessinsider.com/here-is-exactly-how-warren-buffettschinese-auto-company-byd-copied-competitor-designs-piece-bypiece-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-WeDo/Automotive/Companies/Mahindra-Reva-Electric-Vehicles http://forbesindia.com/blog/business-strategy/why-the-economics-ofmahindra-reva-e20-dont-work/ http://www.newindianexpress.com/business/news/article1514417.ec e#.Uyn4LPmSzd0 http://automotivehorizon.sulekha.com/samsung-sdi-partner-boschto-supply-lithium-ion-batteries_newsitem_3481
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