Is your products & services relevant to the market & how long would those be relevant, a question that every business should periodically ask. Additionally it’s also about is your business model relevant (brick & mortar against online) and finally is your business relevant (e.g. camera film making is almost obsolete)?
Every industry is vulnerable today to the number of external factors and threats. Those are emerging from new technologies, changes in customer preference, changes in markets and finally impact of changes in competitive & environmental landscape. These impacts are both positive and negative. However in both the cases the business should gear up itself to leverage the benefits and overcome the challenges. Those who see this coming and operate professionally can then survive under any economic condition-be it recession or otherwise.
To understand this better, let’s consider this in relation to automobile industry-in context of passenger vehicles i.e. two & four wheelers.
What is the immediate impact of economic revival or potential events on Indian auto manufacturers?
The festival-Dassera & Diwali sales data shows that there was a surge in demand for 2 & 4 wheelers compared to last year or on QOQ basis. Recently there was news related to 7th pay commission. Irrespective of actual date & percentage hike, it is certain that millions of central Govt employees would get this next year.
What would be the impact of this on Auto industry?
A large number of employees are in 3rd and 4th category that will also get relatively more money; take home in hands than seniors. Considering the high costs of buying a house, a major portion of this new found wealth will be spent on buying two wheelers or upgrading from two to four wheelers. So obviously there would be some “acche din”- better days ahead for 2 & 4 wheeler manufacturers & their suppliers.
But this is a no brainer, so let’s go beyond.
Impact of Technology Changes:
Technology landscape is changing. In order to save fuel costs, reduce weight & increase efficiency Airline industry have adopted composites & carbon fibre components. Isn’t fuel consumption, reduced weight & efficiency equally relevant to automobiles? So what are chances that these materials sooner or later would be adopted by auto companies & if yes what would be the impact on component manufacturers? What would be the required changes they need to include in their mid to long term planning process? What budgets need to be allocated today to be ready when it hits them?
3D printing today has gone beyond the hype cycle & across number of industries is has been successfully commercialized. Coming back to auto component manufacturers, do they know or have they studied how many of their products can be produced through 3D printing, when would this become mainstream and how would it impact their business?
Google is piloting a driver less car. This will certainly become a reality in near future. So what will happen to the wheel and its related components? When would this happen and what would be the impact on those component manufacturers?
Impact of changing customer preferences:
While one can think of many areas, I will just take one small example. Many customers today are shifting from manual to automatic cars i.e. automatic transmission. When I bought my first car people used to ask is it AC or non-AC. Do you know today any car that’s non-AC? Similarly in next couple of years manual transmission cars would be a history in India. What would be its impact on those manufacturers who produce gear boxes & ancillary products? While there is a threat, there is equally an opportunity here. Does the manufacturing facilities getting upgraded to address this?
Being health and environment conscious many people are now turning to bicycles. While miniscule today, would this number go up? If yes what would be its impact on 2&4 wheeler sales?
Impact of changing markets:
A significantly high portion of car sales is still in metros, tier I & II cities. So these are focus markets for car manufacturers. Now consider two changes in these markets-
Impact of Global & Economic changes:
This week we have world leaders assembled in Paris for Climate Change Conference. Looking at the way world is becoming serious to reduce temperature and carbon emission, alternate sources of energy and fuel will soon become everyone’s top priority.
There are already bi-fuel /multi-fuel cars and those running on batteries. These changes are inevitable and going to come rapidly than we think. Are auto companies geared up? This is not just a question for their growth but equally about their survival.
One question that I haven’t considered in this article is whether or not you want to be a leader? If you are a follower happy adopting technologies and innovations that are adopted by others, do you think one day you can or want to innovate something? Do you have the culture in your company? Are you seating on a pile of cash that you otherwise don’t know what to do with? Can you be the leader at least in one area? Think!!
As George Bernard Shaw said: “The reasonable man adapts himself to the world; the unreasonable one persists in trying to adapt the world to himself. Therefore, all progress depends on the unreasonable man.”
Finally, I take your leave with a last question. Can a car fly? Not sure what I see online is real or animated, but we have certainly seen this in the movies?And going by history, don’t you think this can very well be a reality in near future?